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The Bank of England (BoE) last week announced the first rate cut in this cycle. I believe a lot FTSE 100 stocks may experience better fortunes if this trend continues.
Two stocks on my radar are Barratt Developments (LSE: BDEV) and Unilever (LSE: ULVR).
That is why I would like to buy some of their shares if I had the cash to do so.
Barratt Developments
High interest rates, along with inflation, have had a negative impact on the real estate sector and firms such as Barratt. Construction costs soared, food became scarce, and consumers couldn't afford expensive credit. These consumers have been too busy fighting other problems such as high energy costs.
These issues are ongoing risks. Inflation may have fallen, but it could rise again. In addition, the first interest rate cut has taken place, but there is no guarantee that further cuts are on the way. Barratt may find liquidation, sales, profits, and returns are affected going forward.
From a bullish perspective, Barratt is well positioned to benefit from further price cuts, in my view. First, inflation means that construction is cheaper, without reducing quality. This may encourage elimination. In terms of sales, buyers may have more money in their pockets as a result of the aforementioned factors, and the housing market may also increase with affordable mortgages. This could be good news for Barratt's stock, earnings, and shareholder returns.
Next, the shares look very good value for money right now at a price-to-earnings ratio of just over seven. In addition, the 5.5% dividend yield is attractive to income. However, I understand that benefits are never guaranteed.
Unilever
Like Barratt, the economic slowdown has hurt Unilever, which focuses on premium branded goods. The rise of key divisions from leading supermarkets, as well as disruptors Aldi and Lidl, has hurt the business, and its shares. This is because consumers want to make their money last. There is every possibility that some consumers will stick to cheaper alternatives and even more money in their pockets, and this is a risk that I will keep an eye on as it could affect Unilever's performance, shares, and returns.
On the other side of the coin, it's hard to ignore Unilever's brand strength, broad presence, and track record. However, it is important to note that past performance is no guarantee of future performance.
In addition to this, the recent strategy made by the company to dispose of underperforming brands and invest in those that support the business may boost the company and its performance levels.
As well as having protective features – consumers need to eat, clean, and perform other important daily tasks – Unilever's basics look good too. Shares trade at an earnings multiple of 20. I would consider this a premium, but still cheaper than history. However, I personally have no problems paying a fair price for an excellent company. Finally, the dividend yield of 3.1% reduces the investment case.
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