The FTSE 100 index is home to the 100 companies with the highest market capitalisation listed on the London Stock Exchange.
In my view, more than a handful of stocks in the blue-chip index look undervalued at present. This means they could be trading below their underlying intrinsic value.
So, I’m convinced that now could be an ideal time to hoover up some cheap FTSE 100 shares before the opportunity passes.
Here’s a look at two that are currently on my watchlist.
A FTSE 100 company with a truly global reach
Glencore (LSE:GLEN) is one of the world’s largest globally-diversified natural resources companies.
In February, the group reported a strong set of financial results. Full-year revenue climbed 26% to $256bn, with underlying cash profit (EBITDA) rising by record levels to $34.1bn.
Despite solid results, Glencore’s share price performance has been lacklustre. Since April last year, the shares have climbed by just 1%.
Granted there are plenty of uncertainties and risks ahead. For example, challenges in relation to the broader economic outlook could cause significant harm to the group’s financial position.
The marketing business sources commodities and products from Glencore’s global supplier base and sells them to customers worldwide. Through such activities, the group sets itself apart from companies that focus primarily on commodity production.
On top of this, the company boasts an attractive dividend yield of 7.5%. Combine it with a price-to-earnings (P/E) ratio of around 4.3 and I think the shares represent significant value.
If I had some spare cash lying around, I’d take the opportunity to snap up some Glencore shares for my portfolio at what looks to me like a discounted price.
A FTSE 100 oil supermajor striving for net zero
BP (LSE:BP.), the British multinational oil and gas company, is one of the largest companies in the world measured by revenues and profits.
Earlier this year, the group reported an outstanding financial performance for 2022. Profits more than doubled to $27.7bn, reflecting a 48% average increase in the price of oil and gas achieved for the company’s oil production and operations.
On the back of such strong results, the share price has rocketed since this time last year, rising by over 40%.
Despite this, I think BP shares could still be trading well below their intrinsic value. After all, the group’s P/E ratio is currently an estimated 4.5.
That said, I’m conscious of several issues that could derail its progress. Not least among these is a persistent downward trend in oil prices, which would severely harm profits.
If the global economy slows down throughout the rest of 2023, the risk of volatility is real.
However, BP expects oil prices to be shored up by a combination of improving Chinese demand and uncertainty surrounding Russian exports amid the war in Ukraine.
In addition, I’m excited about BP’s long-term prospects stemming from the transition towards providing lower-carbon energy solutions. That’s why, if I had the cash to spare, I’d happily buy BP shares for my portfolio while they still look cheap.
