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After a few solid months FTSE 100 I can see many cheap stocks that I would like to buy right now. That’s good news because cheap stocks are my favorite type.
Top of the list Barclays (LSE: BARC). I am surprised to see the bank trading at a price-to-earnings ratio (P/E) of only 9.2. That is below the FTSE 100 average of 14.2 times.
I expected it to be more expensive, given that Barclays’ share price has increased by 79.17% in the last 12 months.
Can the Barclays share price continue to rise?
The big banks have done well this year but Barclays has more exposure to the US through its investment banking division. So it may benefit from Trump’s trade.
Even better, there seems to be less exposure to car finance scandals. That is in stark contrast to the FTSE 100 competitor Lloyds Banking Groupits shares took off as a result.
Barclays could also benefit from a growing sense that interest rates are set to stay high for a long time. This will allow banks to maintain their interest rates, the difference between what they pay to savers and what they charge borrowers.
Business is still bombing. On 24 October, Barclays reported pre-tax profits of £2.2bn in Q3, up from £1.9bn a year earlier.
Banking is always risky, especially given today’s economic and political concerns, especially in the UK domestic market. Barclays’ share fell to 3.31%. My biggest concern is that it shares my inactivity or even regression after a stellar run. I still plan to buy it when I have the cash.
Gosh, National Grid shares look cheap
Transmissions giant National Grid (LSE: NG) may not look incredibly cheap with a P/E of 11.76 times, but personally, I was surprised. I’m used to trading at 15 or 16 times profit, almost every time I look. That is a fair price.
I always emphasized its consistent valuation on the fact that National Grid is a natural state with regulated profits, so investors knew exactly what they were getting.
Then again, it’s been a funny year for National Grid. Its share price fell in May after the board announced a £7bn rights issue to back £60bn of capital investment over the next five years. It’s not the kind of thing investors expect from this stock. It rebounded sharply, however, as investors got the chance to add to their stake at a reduced price.
It sank 3.91% last month after the board reported a 50% drop in pre-tax profits to £684m on 7 November. However, profits rose 26% to £1.43bn on an underlying basis. Over the past 12 months, National Grid’s share price has increased by 5.84%.
The trailing yield is a whopping 5.8%, providing a solid total return. I will admit I am worried about National Grid’s £43.6bn debt pile and infrastructure investment needs. But if I don’t buy the stock at today’s discounted price, I never will.
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