The London Stock Exchange is deeply unpopular with investors at the moment. For me though, this disenchantment has resulted in some potential bargains.
Here’s two FTSE 100 stocks that I’m eyeing up right now.
Glencore
I started a small position in Glencore (LSE: GLEN) a while ago because I thought the shares were undervalued. After them dropping 16.5% this year, my opinion hasn’t changed, so I’m contemplating a top-up.
The commodities giant has been doggedly trying to acquire Teck Resources this year in order to de-merge their combined coal businesses. Now this has failed, it has made an alternative offer in cash to acquire Teck’s steelmaking coal business.
I think a potential spin-off makes perfect sense, despite coal accounting for more than half of Glencore’s record profits last year. It would soothe the concerns of institutional investors who have requested that the company justify how this carbon-intensive business aligns with its climate targets.
If the Teck deal fails though, there’s a risk Glencore might not spin out its coal unit. This could force some asset managers to dump the stock on Environmental, Social and Governance (ESG) grounds, placing downwards pressure on the share price.
Either way, the company will continue to produce a vast array of commodities that are essential for green technologies. These include copper, cobalt, zinc and nickel. Plus, it has a growing recycling business.
So I think this stock is a cheap way to play the decarbonisation trend.
Analysts expect the miner to generate earnings per share of 70 cents this year. That puts the stock on a forward-looking price-to-earnings (P/E) ratio of about 8.5. That’s cheaper than the market and most other mining shares.
Persimmon
The recent woes of housebuilders are well documented. They’ve faced soaring build costs, which have squeezed profit margins. Also, interest rates have been marching higher, resulting in sky-high mortgage rates and reduced affordability for homes.
Some fear this could cause a major slump in the UK housing market.
Little wonder then that the Persimmon (LSE: PSN) share price is down 67% in just over two years. This means the housebuilder’s shares are now the same price they were 10 years ago.
My gut instinct tells me this is a buying opportunity, so I’m considering adding the stock to my ISA or SIPP. But I’d imagine a fair few investors have already come to harm trying to catch this falling knife recently.
Still, the price-to-book (P/B) ratio of 0.98 now looks attractive compared to recent years. And there’s a forward dividend yield of 6.2% for FY24. After cutting the payout by 75% this year, I’d imagine management will be keen to reward shareholders.
Of course, the near-term outlook is undeniably bleak. And the shares could well fall further if the housing market wobble turns into something worse. But I’d be buying the stock with a long-term holding period in mind.
Surely the UK housing market will recover as inflation and interest rates cool off, won’t it? And perhaps the next elected government will restore schemes to help folks get on the housing ladder.
In short, I think the sector could rebound strongly once the dark clouds start to part. I don’t know when that will happen, but as a long-term investor, time is on my side.
