Earlier this month, my wife received a tax-free windfall from a long-term company savings plan. As a result, we have a hefty sum to invest into our family’s financial future. Thus, I intend to go on a mini-buying spree next week, focusing on undervalued FTSE 100 and FTSE 250 shares.
Two cheap FTSE 100 shares
Like many experienced investors, I keep and update a watchlist of stocks in companies that I wish to own. Here are two Footsie stocks I intend to buy within days.
#1: Anglo American
Anglo American (LSE: AAL) is a multinational mining company. It digs up and sells a wide range of commodities worldwide, including coal, copper, diamonds, iron ore, nickel, platinum group metals and steelmaking coal.
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As a leading miner, Anglo American’s shares are often shunned by environmental, social and governance (ESG) investors. But demand for its metals is set to rise as we decarbonise the global economy.
On Friday, 4 August, this stock closed at 2,242.5p, valuing the group at £30.1bn. The shares are down 21.8% over one year, but have risen by 35% over five years, excluding cash dividends.
At current price levels, Anglo shares trade on a multiple of 16.7 times earnings, for an earnings yield of 6%. While this is pricier than the wider FTSE 100, this is largely due to falling earnings in 2023 — a trend I hope to see reverse next year.
While this stock offers a market-beating dividend of 4.5% a year, this payout is covered only 1.33 times by earnings. Also, Anglo cut its cash payouts in 2015, 2016, 2020 and 2022. Despite this ropey recent history, I aim to buy and hold this stock for perhaps 10+ years.
#2: M&G
Recently, I’ve repeatedly written about FTSE 100 investment manager M&G (LSE: MNG) shares. That’s because it’s probably the #1 undervalued UK share on my buy list currently.
Founded in 1931, the asset manager handled £342bn of client assets at end-2022, with 5m retail customers and 800+ institutional clients. But when bond and share prices both dived last year, the group plunged from steady profits into a hefty loss.
I’ve passed up several opportunities to buy M&G shares at a discount, including near the 52-week low of 159.3p in late September 2022. Over one year, this FTSE 100 stock is down 9.6% and it has lost 12% of its value since listing in London in October 2019.
On Friday the shares closed at 198.1p, valuing the group at under £4.6bn. This makes M&G a relative minnow among global asset managers, so it might be snapped up one day by a larger rival.
Takeover activity aside, what really draws me to M&G shares is their double-digit dividend yield of 10.1% a year. This isn’t covered by trailing earnings, which is a risk. But I expect earnings to rebound this year. Hence, I don’t think the group will reduce this payout in 2023.
So there you have it: two low-priced FTSE 100 shares I intend to buy for long-term growth and income. However, Motley Fool rules mean that writing about these stocks today prevents me from buying them before Wednesday, 9 August at the earliest. Hence, I hope market prices don’t move up against me in the meantime!
