The FTSE 100 may have picked up in recent days but I can still see plenty of top UK stocks trading at rock bottom low valuations. I’ve already brought several for my self-invested person pension (SIPP), and I’m on the hunt for more before share prices rise higher.
Barclays is my first pick. Today, it trades at a frankly ridiculous 4.8 times earnings (15 times is seen as fair value). Its price-to-book value, which measures the stock against the value of its net assets, has slipped to just 0.3 (a figure of 1 is seen as fair).
I could understand if Barclays was losing money hand over fist, but first-half profits recently surged 22% to £4.5bn. Investors are worried about the impact of high interest rates on debt impairments, but I think that’s a short-term risk. When inflation peaks and falls, Barclays could fly. While I wait, I can look forward to a forecast yield of 6% covered 3.7 times by earnings.
Cheap as chips and just as tasty
Recent stock market volatility has been tough on financial services companies, with shares in insurer and asset manager Phoenix Group Holdings also struggling. It’s now valued at just 6.4 times earnings. The forecast dividend is a staggering 10.1%, covered 1.5 times.
Super-high yields can be vulnerable, but I think this one may be sustainable. Again it’s one to buy today then tuck away for a brighter future. In the interim, I’ll keep reinvesting those kingsize dividends.
I recently bought paper and packaging specialist Smurfit Kappa Group for my SIPP and I’ve been thinking of buying more. It’s been knocked by the slowdown in ecommerce due to the end of lockdowns and the cost-of-living crisis, but recent first-half results still showed EBITDA earnings of €1.1bn on revenues of €5.8bn.
It may not qualify as dirt cheap, trading at 8.7 times earnings, but it’s still great value. The share price has been growing lately and I’m hoping that will continue. It’s forecast to yield 3.83%, covered 2.3 times by earnings. I have high hopes for this one.
Mining giant Anglo American is another FTSE 100 company who shares have been sliding lately, as investors fret over a potential crash in the world’s number one commodity consumer China. Falling diamond sales have also hit subsidiary De Beers.
Anglo American trades at just 5.4 times earnings. It’s forecast to yield 4.3% covered 2.4 times. Another one to buy today in hope of a recovery tomorrow.
That’s quite a shopping list
The same applies to my final pick, housebuilder Barratt Developments. Its shares have been hammered by fears of a house price crash, but it’s cheap at 5.4 times earnings and is forecast to yield 7.4%, covered twice.
While sales and reservations will fall as mortgage rates rise, Barratt had £2.2bn worth of forward sales at the last count plus £1.07bn net cash. That’s despite recently completing a £200m share buyback and spending £820m on land.
While I love buying cut-price UK stocks, there’s no guarantee they will recover their lost value. It’s important to be patient. Nobody knows for sure when the recovery will come. But when it does, I think all five companies listed here are nicely placed. I’d rather buy them cheaply today than more expensively tomorrow.
