Warren Buffett says a “too-high purchase price” can undo a decade’s worth of stock market returns. It’s not enough to buy a good company, you need a good entry point too.
One way to do this is to look at stocks near their 52-week lows. A company at its cheapest price in a year could end up being a complete steal. These three big-name FTSE 100 stocks fit the bill. Should I buy them today?
| Share price | 52-week high | Difference | |
| British American Tobacco | 2,573p | 3,628p | -29% |
| Persimmon | 1,180p | 1,915p | -38% |
| Anglo American | 2,463p | 3,672p | -33% |
British American Tobacco
The first stock here is global behemoth British American Tobacco (LSE: BATS). Its hugely popular brands Dunhill and Lucky Strike make it the world’s leading cigarette seller by sales.
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Interestingly, this is a company that is growing. While smoking is declining in richer countries, there are more smokers than ever in the world. Most of this increase comes from middle-income countries, where more and more people can afford cigarettes.
As a potential investor, I’m wondering how long this can continue. The data suggests global smoker numbers will increase up to 2030, but what then? Long term, it’s hard not to see ciggies as on the way out.
BAT does have a sideline in non-combustibles – vapes, e-cigarettes and the like. These are 14% of revenues and growing. But these products might come under the regulatory hammer soon, and one reason for the 52-week low is rumoured action from the US government in this area.
I do own a position here already, but this recent uncertainty does put me off buying more.
Persimmon
On the other hand, UK housebuilder Persimmon (LSE: PSN) doesn’t have any of these long-term issues.
The shares have been struggling recently, to be fair, and no wonder. High-interest rates make it hard for people to buy mortgages, and a cost-of-living crisis means people aren’t flush with cash for house deposits. The 52-week low is hardly a shock here.
But housing is cyclical and down periods are to be expected. And the York-based housebuilder has no debt, £4bn in assets, and £700m-£800m in free cash flow. It’s got the financial muscle to get through a tough period like this.
What’s more, the demand for housing in the UK is huge. The country needs more houses desperately, and it’s a problem that is getting worse. This should be a strong tailwind when the economy gets back on its feet.
I think the signs are this is a cheap buy. I plan to pick up shares in the firm soon.
Anglo American
Miner Anglo American (LSE: AAL) looks like another solid long-term option.
The company recently missed earnings targets and net income was down 75% year on year. The reason was a decline in the price of metals – standard procedure in this traditionally volatile industry.
So is this another buy while the shares are looking cheap?
Well, mining is a defensive industry. And one that is growing too. Anglo American looks well-placed with its operations in platinum, diamonds, copper, and nickel. Those last two metals are important for green technologies which could be a strong tailwind.
I could buy in for a well-covered 6% yield from the firm too. Near a 52-week low, I’d have to say this stock looks like good value. I’ll look at buying shares here soon.
