These 3 FTSE 100 shares have bombed, but I’d buy one now

These FTSE 100 shares have dived between 23% and 33% in the past three months. I already own one, plus I aim to buy this second cheap stock ASAP.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

One of my favourite hobbies as an investor is trawling through the FTSE 100, looking for ‘fallen angels’.

Fallen angels are shares in otherwise solid companies that have been beaten down. Once I’ve identified suitable stocks, my goal is to buy and hold these undervalued shares for the long term.

FTSE 100 winners and losers

Earlier, I screened the Footsie for value shares and, over the past three months, the following numbers jumped out at me.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Over three months, the FTSE 100 has lost 4.6% of its value. In that time, 34 stocks have gained in value, while 66 have declined.

Among the 34 winners, three-month returns range from 24.1% to 0.5%, with an average gain of 7.8%. Among the 66 losers, returns range from -0.1% to 33.1%, averaging -10.6%.

The Footsie’s biggest losers

These are the index’s biggest laggards since 3 March, plus price changes over one and five years:

CompanySectorThree monthsOne yearFive years
Anglo AmericanMining-23.1-40.8+28.0
Vodafone GroupTelecoms-23.6-41.7-60.3
Ocado GroupRetail-33.1-62.1-60.8

My table shows that three-month declines among these FTSE 100 dogs range from almost a quarter to nearly a third. Also, all three stocks have been dogs over 12 months, losing between two-fifths and almost two-thirds of their value.

Over five years, the picture looks even worse, with two of the stocks crashing more than 60%. Frankly, anyone owning these three stocks since, say, 2021, is going to be disappointed.

I’d back one of these businesses today

By the way, my wife and I bought shares in Vodafone Group at 90.2p each in December 2022. To date, we are sitting on a paper loss of around a sixth (-16.3%). While we have no intention of selling our Vodafone stock anytime soon, lack of cash prevents us from buying even more.

Meanwhile, I can’t wait to receive a tax-free cash windfall in July, which we will use to buy more shares. And the ‘dog’ stock I’d buy from my table above is mega-miner Anglo American (LSE: AAL).

Anglo American looks cheap to me

I’d have loved to have bought this FTSE 100 miner earlier this week, when its shares collapsed to a 52-week low of 2,223.5p on Wednesday (31 May).

As I write, the shares are up 5.1% today to trade at 2,417p, valuing the group at £32.3bn. But that’s a long way short of the 52-week high of 4,036p, hit almost a year ago on 7 June 2022.

At current levels, this stock trades on a trailing (that is, historic) price-to-earnings ratio of 8.2, which translates into a market-beating earnings yield of 12.3%.

Meanwhile, the bumper dividend yield of 6.8% a year is far above the FTSE 100’s yearly cash yield of around 3.7%. Also, this dividend is covered 1.8 times by earnings, which offers some margin of safety.

Now for the bad news. Metals prices have fallen this year, which will drag down Anglo American’s 2023 earnings. Also, the group has a history of cutting its dividend during hard times, most recently in 2015, 2016, 2020, and 2022.

Even so, I’d happily buy this cheap stock today for future dividends and capital gains — if I had any spare cash, that is!

This AI stock is becoming a digital juggernaut in a £ 12.5 billion market!

🤖 Curious about the next big player in AI? 🤖

Our leading industry analysts have uncovered a trailblazing content platform that's revolutionising the industry with its unparalleled generative AI technology, setting new standards in creativity and efficiency.

Care for a sneak peek?

Trusted by global giants like Amazon, Disney, and Netflix, this innovative company is not just transforming digital media with AI-generated 3D content but is also capturing a significant share of a £12.7 billion market!

With a remarkable 62% gross margin, indicating exceptional profitability and operational efficiency, this company's growth trajectory positions it as a must-watch for savvy investors.

Best of all, we're offering exclusive access to the name of this game-changing stock, absolutely free!

Discover your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Cliff D’Arcy has an economic interest in Vodafone Group shares. The Motley Fool UK has recommended Ocado Group Plc and Vodafone Group Public. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Older couple walking in park
Investing Articles

Could £300 a month invested in US and UK shares reach a million by retirement?

Could an investor retire with a million pounds just by dedicating £300 a month to US and UK shares? Mark…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

Is £800 enough to start an ISA?

Is it worth bothering with an ISA with less than £1,000 to spare? This writer believes it may be --…

Read more »

Investing Articles

3 reasons Tesla stock may be a long-term bargain

This writer is keen to buy Tesla stock at the right price. He doesn't think it's there yet -- but…

Read more »

Investing Articles

Nvidia stock is a lot cheaper than before – or is it?

Nvidia stock has been caught in the whirlwind of market volatility. This writer has been waiting to buy, so might…

Read more »

Top Stocks

3 FTSE stocks Fools are eyeing up for choppy markets

A selection of companies listed on the UK stock market on the watchlists of four Foolish investors.

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

A £10,000 investment in Rolls-Royce shares last week is now worth this…

Harvey Jones says Rolls-Royce shares couldn't escape the volatility of recent weeks, but wonders if the recent dip is a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Prediction: in 2 years these S&P 500 stocks will be much higher than they are today

These two S&P 500 stocks have been beaten down in recent weeks. But Edward Sheldon expects them to move much…

Read more »

Investing Articles

10% yields! Why a volatile stock market is great news for passive income investors

The recent stock market volatility has given passive income investors the chance to earn double-digit returns. But they still need…

Read more »