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It was a bad month for the FTSE100. The UK index is down almost 5% in the past 30 days after a series of economic shocks caused a sell-off in the global market.
However, I have long viewed the FTSE 100 as a good place to look for value stocks. The Footsie, and many of its stocks, have been unpopular since the Brexit vote spawned a period of economic uncertainty.
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But for now, I think concerns about UK equities are overblown.
Economic forecasts aside, “only” around a quarter of FTSE 100 sales are tied to the UK economy. It is clear that the index and the economy are decoupled to some degree.
So, here are three no-brainer value stocks I bought or are looking to buy before July.
Hargreaves Lansdown (LSE:HL) is down 51% over the past year. The company has done extremely well during the pandemic, but growth has not been sustained.
Amid numerous blockages, the British flooded the Hargreaves Lansdown trading platform. But, with offices, restaurants and the wider economy fully open, the business has seen a downturn.
It has a price/earnings ratio (P/E) of 12.3 and compared to many stocks in the FTSE 100, it might seem a bit pricey.
But I think Hargreaves Lansdown is operating in a high growth area with suggestions that one in 10 Britons have started investing since the start of the pandemic. I also see the market-leading investment platform becoming more and more popular in the future.
However, there could be short-term difficulties this year as individual investors reconsider their finances amid a cost-of-living crisis.
Khaki (LSE:PSN) is perhaps best known for being a big dividend hitter. However, I think there are more reasons to buy these stocks, other than the current 12% dividend yield.
First, it seems unlikely that this huge dividend will be sustainable. So I would buy this stock for the long term value.
Persimmon is one of the UK’s largest property developers, but is also less exposed to the siding crisis than other companies.
The developer plans to spend £75million on cladding homes in the UK. That’s less than 10% of 2021 pre-tax profits. By comparison, some of its peers will see a year of profit wiped out by the promise of coating.
Despite the economic turmoil, other homebuilders have recently upgraded their earnings forecasts for the year. So while there may be problems caused by higher interest rates and inflation, we don’t see it yet.
Lloyd’s (LSE: LLOY) is a major mortgage lender. In fact, 71% of its loans are mortgages. The bank is therefore more exposed to the real estate market than its more diversified peers.
I see Lloyds as an unloved stock in the FTSE 100. It trades with a P/E ratio of just 5.8, with few banks looking cheaper.
For the first quarter, it reported pre-tax profits of £1.6 billion, beating the average forecast of £1.4 billion. However, this was down from £1.9bn in the same quarter last year. This was largely due to the £177million set aside to protect the bank against possible defaults.
Higher interest rates will increase spreads, so the short-term outlook could be positive if mortgage volumes do not decline.
Likewise, I like the idea of becoming a landlord and entering the rental market.
A cocktail of economic problems could prove problematic for her over the next year, but in the long term, I’m positive on Lloyds.