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I FTSE 100 have a strong year. However, I still see a lot of value in UK stocks right now.
Although this year has produced periods of volatility, that is inevitable in the stock market. Looking at the bigger picture, I think UK equity may start to rise in the coming years.
The FTSE 100 currently has a price-to-earnings (P/E) ratio of 11. That's below its historical average of between 14 and 15.
I really like the look of these two. If I had the money, I would add it to my portfolio today.
JD Sports Fashion
The first is JD Sports Fashion (LSE: JD.). Its shares have disappointed this year. They decreased by 3.7%. That said, the stock is up 16.2% over the past six months and 14.3% over the past month. After a bad start to the year, it is gaining momentum.
Even with that upside, I still think the stock looks like good value for money. It trades at a P/E ratio of 14.8. That's significantly less than the historical average of 23.
Its share price has had a rough start to the year due to tough trading conditions. Sales suffered a sharp decline and as a result the company issued a profit warning. Bad investors rushed to get their shares out. In the coming months, this will continue to be a risk for the company as consumers watch their spending habits and trading conditions remain difficult.
However, looking back, I think JD Sports Fashion can thrive in the long run. To begin with, interest rate cuts should lead to spending. In addition, the company has been making solid progress with its expansion plans. It aims to open 200 stores this year and has begun to focus more on international expansion. As part of this, it recently acquired the US company Hibbett earlier this year, which has more than 1,100 stores across the pond.
NatWest
Unlike JD Sports Fashion, NatWest (LSE: NWG) had a great year. The stock is sad. Year to date, it is up 55.9%.
That hampers the FTSE 100's return to water. However, even after the increase, I think its shares still look cheap.
They now trade at a P/E of 7.1. In my eyes, for NatWest's quality business, it looks cheap. Its forward IP/E is 7.8.
I also like NatWest for the income they offer. Its yield remains at 5%, covered twice by profit. Last year, the bank increased its payout by 26% to 17p per share.
I am also impressed with its performance in recent times. Second quarter profits rose more than 25% to £1.3bn. In its latest update, NatWest also announced that it has acquired a portfolio of leading UK residential properties. Metro Bank for £2.5bn.
The biggest threat I see to the company is falling interest rates. While they will improve investor sentiment, they will reduce NatWest's margins, which will reduce its profits.
But with momentum on its side, and its low valuation, I like the look of NatWest.
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