The stock market has historically been difficult to predict in August and September, usually being the worst months for investors. However, with these now coming to a close, I’m looking at bargain FTSE 100 stocks for my portfolio.
I’ve got my eye on one in particular, Standard Chartered (LSE:STAN). With interest rates climbing, and fears of a recession lingering, the finance sector has experienced some major volatility, which could present some bargains.
Banking giant Standard Chartered has operated globally across private and corporate financial services since 1853.
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The company has had a good 2023 despite the turmoil in the sector, and is up over 18%. However, with the share price approaching pre-pandemic levels, now is a good time to think about whether there is further growth ahead.
Companies in the financial sector can be difficult to analyse, but I like to compare key metrics against other companies, giving me an idea of how Standard Chartered might be positioned.
The fundamentals
First up, I like to consider the price-to-earnings (P/E) ratio. Standard Chartered has a P/E of 8.9 times, which is notably higher than rivals HSBC at 6.3 times, and Lloyds at 5.1 times. This may suggest that there could be better opportunities elsewhere, but doesn’t tell the whole story.
Next, I look at the discounted cash flow calculation, which calculates an approximation of fair price. With the share price currently at £7.53, the fair value of £9.51 suggests there could be 21% upside. Analysts also have a strong consensus that there is 22% more growth ahead based on their price targets.
How does the future look?
With fears of further economic uncertainty, I like to invest in companies that fall into the essential category. Regardless of what happens over the next year, individuals and companies will continue to use banking services. With earnings expected to grow by 11%, and earnings per share (EPS) also forecast to grow by 16%, Standard Chartered may offer the stability and growth that other FTSE 100 companies cannot in the current environment.
Using cash wisely
Of course, no investment is without risk. If a global recession were to emerge, the company could see difficulties with loans, particularly in emerging markets. However, Standard Chartered has tremendous cash reserves, and as we saw in the banking turmoil in early 2023, these events can be opportunities for strong companies and investors alike.
The company has grown earnings by over 25% every year for the last five years. This strong track record gives me confidence that Standard Chartered has what it takes to emerge as a winner from any future downturns, investing at the right points to build market share, and improve fundamentals further.
Standard Chartered has committed to growing its dividend of 2.2%, and buying back stock over time. This indicates there is confidence that the future looks good, and the fundamentals are strong enough to ride out any turbulence along the way.
Am I buying?
The financial sector is often difficult to get right, but as we saw in the US regional banking collapses in March, they can be tremendous opportunities if you pick the right companies. I feel that Standard Chartered is one of the best bargains in the FTSE 100 at the moment, and I’ll be buying at the next opportunity.
