Several FTSE 100 stocks are trading within about 5% of their lowest point over the past year.
Smaller share prices can often help investors find keener valuations.
But that isn’t always the case. Sometimes, stocks deserve to fall in price because of underperformance in the business.
An indiscriminate bear market
However, the UK stock market has been in a long bear phase. The extent of the falls isn’t obvious in the main FTSE 100 index. But below the surface, many individual names have been tumbling.
That means investor sentiment has been poor for some time. And some companies might have been unfairly marked down by the market. So it’s worth considering stocks near their 52-week lows now.
For example, cigarette and smoking products maker British American Tobacco has a share price that’s on the floor.
The industry faces regulatory risk and a declining worldwide market for cigarettes. So there are risks. But with the share price in the ballpark of 2,460p, the anticipated earnings multiple for the current year is below seven. And the dividend yield is almost 10%.
The business is a good candidate for further and deeper research because it operates in a defensive sector and has strong cash flows.
But fast-moving consumer goods provider Unilever (LSE: ULVR) is another near its lows of the past 12 months.
With the share price around 3,900p, the valuation looks quite attractive. For example, the forward-looking dividend yield for 2024 is about 4%.
A valuation cycle
Defensive, cash-generating stocks do tend to follow the ups and downs of a valuation cycle. Investors blow hot and cold towards such stocks depending on other factors in the economy and in the markets.
But the stock might have swung to a cyclical low for its valuation and that could be an opportunity.
However, there’s some risk that sales of the firm’s popular consumer brands could fall further out of favour with end-users if economic conditions remain tough.
Nevertheless, the stock and its business are worth deeper research now.
Meanwhile, a similar set of circumstances apply to premium alcoholic drinks provider Diageo.
With the share price near 3,109p, it’s near the bottom of its range for the past year. And the valuation looks lower than it has for a long time.
Robust dividends
Earnings look set to wobble a bit in 2024. But there’s no sign of that affecting shareholder dividends. City analysts expect single-digit percentage advances in the shareholder payment for 2023, 2024 and 2025.
However, the forward-looking yield is still as low as around 2.8%. So despite the weak share price, there’s still some valuation risk here and the stock could easily go lower.
There’s no guarantee investors will enjoy a good investment from these stocks just because they are near their 52-week lows. But keener valuations makes them decent candidates for further and deeper research with a view to buying and holding for the long term.
