After months of inching upwards, the FTSE 100 index is finally pulling back. It is at sub-7,000 levels, which indicates that share prices are likely to be more subdued right now for constituent companies than they would have otherwise been. To me, that is a good reason to buy some high-quality stocks now. Here are three such, that are also looking dirt-cheap to me now.
#1. 3i: continued growth
The first one I like is the private equity and infrastructure investment firm 3i (LSE: III). The company had a fantastic year in 2020. And from its performance update for the first quarter of the current financial year ending 30 June, it appears to be on a roll this year too.
The company’s earnings before interest, tax, depreciation, and amortisation, commonly known by its acronym EBITDA, more than doubled from last year. I reckon this can give fresh impetus to its share price. After showing impressive growth until recently, it has softened in recent weeks. And its price to earnings (P/E) ratio is still a low 6.5 times.
Even though its continued reliance on its investments in the Dutch retail store Action is not ideal, all things considered it is a pretty cheap stock for me to buy.
#2. Polymetal International: more than a gold price play
Another one I like is the precious metals miner Polymetal International, which has a P/E of 9 times. Its share price has been sliding downwards since peaking in August last year. But I think going by its robust financial health, it is only a matter of time before it starts rising again. In the meantime, it makes for a good income stock, with a dividend yield at 6.2%.
The only caution I have for this stock is that its performance could get hit this year because precious metal prices are not quite as much in demand as they were in last year’s bear market. But then again, it showed robust performance even before last year. I have already bought the stock and am considering buying more of it now.
#3. Segro: a long-term FTSE 100 stock to hold
FTSE 100 warehouser Segro is another stock I like with a sub-10 times P/E ratio. The company benefited significantly from the e-commerce boom last year, leading to an almost consistent rise in share price since last year’s market crash. But it was broadly rising even earlier.
Looking forward, I think e-commerce related companies will only continue to gain over time as online shopping becomes a norm. So, for me the likes of Segro are long-term investments.
In the short-term though, I think there could be some pull back in performance from last year. But this is only because the past year was an outlier. And there is also a possibility that online sales may just not slow down. As such, I expect its overall story to remain intact. It is a buy for me.
