Right now, there are a number of FTSE 100 shares trading within a few percentage points of their 52-week lows. So there could be some opportunities for those who like to buy beaten-up stocks.
Of course, not every stock near its year low is worth buying (falling stocks can keep falling). With that in mind, here’s a look at two I like at current levels, and one I’m not sure about.
Prudential
First up is insurance giant Prudential (LSE: PRU). It’s currently trading for around 780p, a long way below its 52-week high (1,381p).
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I think there’s an opportunity here at current levels. Right now, Prudential’s valuation is low (the forward-looking price-to-earnings (P/E) ratio is about 10).
And the last few times the stock has been down at these levels, it’s rallied hard.
Meanwhile, the company’s long-term growth potential remains significant. That’s because the insurer is now focused on Asia and Africa, where demand for financial products is growing rapidly.
It’s worth pointing out that for sentiment towards the stock to improve, we probably need to see China’s economic prospects pick up. This may not happen in the short term, but I’m confident it will happen eventually.
Unilever
Next, we have consumer goods powerhouse Unilever (LSE: ULVR). It’s currently trading for around 3,730p – around 25% below its 52-week high.
This is another opportunity, to my mind. At present, Unilever shares trade on a forward-looking P/E ratio of 15.9 and offer a dividend yield of over 4%.
Given the company’s strong competitive advantages (including its amazing brands) and excellent track record when it comes to generating shareholder wealth, I think those metrics are very attractive.
One thing that could help Unilever shares in the years ahead is falling inflation. This would most likely push the group’s costs down and its profits up.
Of course, there’s a chance inflation could remain high (UK inflation rose unexpectedly in December). I think this is one of the biggest risks with this stock.
JD Sports Fashion
Finally, we have sportswear retail giant JD Sports Fashion (LSE: JD.). It’s trading for around 107p right now – nearly 40% below the level at this time last month.
This is the stock I’m not sure about right now. It does look cheap (the forward-looking P/E ratio is just eight) and, at some stage, I expect it to rally.
I’m just concerned there could be more share price weakness first. At present, the stock is in freefall (after a recent profit warning). Where this fall is going to end is anyone’s guess.
There’s a chance the stock could find some support at the 100p level. I’m not ruling out a fall below this level however, given the weak state of the consumer right now.
With brokers still downgrading their price targets, the set-up doesn’t look great, in my view.
