Every month, we ask our freelance writers to share their top ideas for value stocks to buy with investors — here’s what they said for September!
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Anglo American
What it does: Anglo American is a major producer of industrial and precious metals such as copper, nickel and platinum.
By Royston Wild. It’s not a shock to see mining shares like Anglo American (LSE:AAL) continue to fall in value. A steady flow of disappointing economic news from China has thrown fresh shade over the near-term outlook for commodities demand.
As I type, Anglo American is the FTSE 100’s biggest mining sector casualty in August. It’s a descent that I believe provides an attractive dip-buying opportunity for patient investors.
Today the diversified miner trades on a forward price-to-earnings (P/E) ratio of just 9 times. This, along with a market-beating 4.5% dividend yield, makes it in my opinion a top value stock.
I’m expecting sales here to surge over a longer time horizon as decarbonisation of the global economy ramps up. Technology like electric vehicles, wind turbines and recycling machines all requires vast amounts of base metals.
Rapid population growth, rising personal incomes, and continued urbanisation in emerging regions are long-term demographic trends that will also drive commodities consumption. With deficits being predicted in several of Anglo American’s markets, profits here could boom.
Royston Wild does not own shares in Anglo American.
CMC Markets
What it does: CMC Markets provides CFD, spread betting and stockbroking services to investors in the UK and certain overseas markets.
By Roland Head. Profits at CMC Markets (LSE: CMCX) tend to rise and fall in line with market activity. Traders are subdued at the moment and the company has warned that profits will be lower than expected this year.
I think CMC’s share price slump has created a buying opportunity, as the stock is now trading below its book value. Most of the firm’s assets are cash or other liquid assets, so this looks like a classic value play to me.
I expect profits to recover when market conditions improve. If I’m right, I think CMC shares could be cheap, trading at around six times 2024/25 forecast earnings.
The main risk I can see is that CMC has another problem that’s not yet apparent. That’s always a possibility, but I don’t think it’s very likely.
Founder Peter Cruddas remains CEO and has a 59% shareholding. He has a powerful incentive to improve performance. I expect a recovery over time.
Roland Head does not own shares in CMC Markets.
CMC Markets
What it does: CMC is one of the UK’s largest retail trading and investing platforms.
By Jon Smith. Over the past year, the share price for CMC Markets (LSE:CMCX) has dropped by 49%. The bulk of this fall has come within the past three months, due to poor financial results. The factor driving this is the revision lower in net operating income for the year.
However, I see the stock as a good value buy. The expectations for income are broadly the same as the figure for last year, so although it isn’t great, we aren’t talking about a business in crisis mode. Further, the business relies heavily on volatility, which makes traders and investors alike transact more. I expect volatility to pick up into next year, so don’t see this as a long-term problem.
The price-to-earnings ratio has fallen to 7.90, below the mark of 10 that I use for assessing undervalued stocks. Granted, the risk is that financial results continue to disappoint, which could act to push the share price even lower.
Jon Smith does not own shares in CMC Markets
ITV
What it does: ITV is a broadcaster and also offers production services such as studios to third parties.
By Christopher Ruane. How bad can things be for ITV (LSE: ITV)?
Looking at the price-to-earnings ratio of 11 and yield of 7%, the presumptive answer might be ‘pretty bad’.
I see things differently for the value stock.
Yes, there are risks such as reduced advertising spend hurting revenues and profits. But the company continues to earn sizeable advertising revenues from its operations. Terrestrial TV remains big business even if it is in long-term decline. Digital services are growing and ITV has been investing heavily in optimising its digital footprint. That has already been paying rewards and I expect those to grow over time.
Meanwhile, the production side of the business offers a counterweight to the ebbs and flows of advertising demand. I think that business has long-term potential to grow.
Given all of those positives, the current ITV share price looks like a bargain to me. I am holding my shares in the hope of price appreciation – and receiving chunky dividends meanwhile.
Christopher Ruane owns shares in ITV.
