Value stocks are more tempting than ever right now due to macroeconomic volatility. Once it subsides, certain stocks could be primed to soar, so now is the time to capitalise, if you ask me.
Two picks I think investors should be taking a closer look at are Centamin (LSE: CEY) and Persimmon Homes (LSE: PSN). Here’s why!
Centamin
FTSE 250 incumbent Centamin is a mineral exploration, development, and mining business. Its biggest asset is its Sukari Gold Mine in Egypt, but it also has some potentially exciting exploratory assets in Burkina Faso and Cote d’Ivoire.
The shares have fallen over a 12-month period by 17%, from 116p at this time last year to current levels of 96p. However, they did spike earlier this week due to a positive update around reserves at the Sukari asset. In fact, the update was a correction to previous figures and, in total, an increase that was met by positive investor sentiment.
As I write, Centamin shares look extremely attractive on a price-to-earnings ratio of just nine. Plus, a dividend yield of 3.6% is enticing too. However, it’s worth remembering that dividends are never guaranteed.
Mining is cyclical and risky. For example, geopolitical issues in Africa could hurt Centamin’s output, performance and returns. Plus, operational issues in the mining process could hurt the stock.
However, the reward outweighs the risk, if you ask me. Sukari is one of the biggest gold mines in the world and its other exploratory assets look really exciting. Centamin won’t stay cheap for much longer, in my opinion, and performance and payouts could be boosted as time goes on.
Persimmon Homes
As one of the largest house builders in the UK, surging interest rates and soaring inflation have hurt Persimmon shares. Completions and sales are down, but this is across the board in the industry.
However, since the back end of 2023, inflation has fallen and murmurs of potential interest rate cuts have helped boost the shares upwards.
Over a 12-month period, Persimmon shares are up 3% from 1,405p at this time last year, to current levels of 1,460p.
So if interest rates are cut and inflation figures come down, more completions and sales are possible. This could boost performance, investor sentiment, and returns.
Now could be a great time to snap up some shares on a decent P/E ratio of 14. Furthermore, a dividend yield of 5.5% looks well covered.
The risks I’m wary of are continued volatility. We’re not out of the woods yet with inflation and interest rates. This was shown by the government’s inflation figures announced last week. I’ll be keeping an eye on developments, especially around higher interest rates.
To conclude, Persimmon’s valuation and passive income opportunity look great. But be warned, the shares have been climbing and I reckon this will continue. Finally, the fact that demand for homes is outstripping supply is a major plus point for the developer. This could help boost long-term performance growth!
