FTSE 100 shares are ripping higher as confidence comes flooding back to the London stock market. Hopes of imminent interest rate hikes and an improving British economy have boosted demand for UK shares.
But this isn’t all.
Analysts have for some time suggested that British stocks are too cheap compared to their international peers. It seems like the market is gradually coming round to this idea, leading to strong demand from value investors in particular.
The FTSE’s still cheap!
The Footsie is up 9% in the year to date. Yet despite these gains, the UK market is still undervalued compared with other overseas indexes. According to Hargreaves Lansdown, it trades at a whopping 43.5% discount to the US.
Emma Wall, head of investment analysis and research at Hargreaves, is adamant that investors should seize the opportunity to buy British stocks today.
She says that “now is the time to get investing in the UK,” noting that “it is home to lots of world-class companies, selling their goods and services across the globe, that aren’t just reliant on the strength of the UK economy to thrive.”
Here’s what I’m doing
It’s a view that I wholeheartedly share. It’s why I’ve been buying more FTSE 100 shares in my Self-Invested Personal Pension (SIPP) in recent weeks. Major additions include Ashtead Group, Legal & General Group, and CRH.
And I’m looking for more great value shares to add to my portfolio. But which ones look too cheap to miss? Here’s one I think savvy share pickers should consider today.
A top value stock
Vodafone Group (LSE:VOD) still has a lot of heavy lifting to turn around its fortunes in Germany. The company is up against it following the introduction of new service bundling laws there.
But I feel this challenge is baked into the telecoms giant’s low valuation. Today it trades on a forward price-to-earnings (P/E) ratio of 10.1 times.
It also deals on a price-to-book (P/B) ratio of 0.4. A sub-1 readout suggests that a stock is undervalued relative to the value of its assets.
Finally, Vodafone shares carry a 7.2% dividend yield, cementing the stock’s position as brilliant value.
This is what I like
I think the communications and mobile money provider has terrific long-term investment potential. I expect profits to soar across the globe in this era of growing digital transformation.
I’m especially excited by its prospects in Africa. I feel soaring population levels and swelling personal incomes could take group revenues to the next level.
With the economic outlook also improving, City analysts expect Vodafone’s share price to rise sharply from current levels of 77.2p.
15 analysts currently have ratings on the FTSE stock. And the average 12-month price target among them stands at 93.1p per share. That’s a premium of around 21% from current levels.
All things considered, I think Vodafone’s share price could be one of the best UK stock market bargains out there.
