The FTSE 100 Index has had a turbulent ride since March 2020, as the UK had its first brush with the pandemic. The country has imposed stringent lockdowns on and off since then, dictated by the number of Covid-19 cases. Needless to say, the UK’s economic scenario took a hit amid the chaos, affecting financial markets and households alike.
The UK blue-chip index suffered massive losses, plunging over 30% from late February to late March 2020, as the pandemic spread across the country.
As the UK markets were tumbling, the Bank of England (BoE) lowered the interest rate to a record-low 0.1% in a move to limit the pandemic-led economic fallout. The UK central bank also raised its bond-buying programme by £200bn ($149bn) to keep the economy afloat. The BoE’s decision appears to have shifted the market sentiment for FTSE100 with the index reversing to gradual growth thereafter.
FTSE 100 is on the verge of a full recovery and to reach its pre-pandemic levels, with some of its components trading at low nominal prices. Let us, therefore, take a look at the cheap FTSE shares (as of 17 November 2021) and which factors weighed on their performance.
Note that stocks discussed in this paragraph are cheap only in nominal terms, and shouldn’t be used as investment advice. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.
What are the cheapest FTSE 100 shares?
Lloyds Banking Group
Lloyds (LLOY) is the cheapest stock on the FTSE 100 at the current 49.99p per share price. Although the stock plunged 15.9% over the past five years, the performance improved in 2021, surging 43.5% year-to-date.
According to Oakmark Funds’ third-quarter 2021 investor letter, published on 30 September 2021, the fundamentals of the British bank improved because of Lloyd’s “conservative approach to reserving for loan losses as well as its decision at the beginning of the pandemic to suspend its program of returning excess capital to shareholders – a program it has since reinstated”.
The country’s largest digital bank and financial services group, with a market capitalisation of £35.48bn, holds an average rating of ‘Buy’ from the ten ratings aggregated by MarketBeat, with eight analysts giving a ‘Buy’ recommendation, and the remaining analysts rating the Lloyds stock as a ‘Hold’. The stock has an average price target of 54.63p, varying from the low price target of 43p to the high of 64p.
Vodafone (VOD) is the second-cheapest stock on the FTSE 100, costing 114.18p per share. The British telecommunications company, with a market capitalisation of £32.25bn, reported its first-half earnings on 16 November.
The group’s first-half revenue rose 5% to €22.49bn owing to its sustainable growth across Africa and Europe. The company’s profit, however, fell to €1.28bn from €1.47bn a year ago. The telecommunications firm declared an interim dividend of 4.5 cents per share.
Vodafone also raised its adjusted (earnings before interest, taxes and amortisation) EBITDA guidance for 2022 to the higher end of the €15.2bn to €15.4bn range, from the previously declared range of €15bn to €15.4bn. The group also upgraded the adjusted free cash flow outlook to at least €5.3bn from the previous estimate of €5.2bn.
Shares of the company plummeted 44.3% over the past five years and slipped 7.7% on a year-to-date basis. Ten analysts rated the stock as a ‘Buy’, according to the data aggregated by MarketBeat, with the current consensus price target of 171.08p. Among the 10 analysts, the price targets range from the low of 150p to the high of 230p.
British media company ITV (ITV) is the third-cheapest stock on the FTSE 100 at 124p per share and with a market capitalisation of £5.01bn.
Last week, ITV announced a 28% year-on-year surge in its total external revenue to £2.38bn in the nine months to 30 September. The company’s media and entertainment businesses garnered a revenue of £1.59bn, marking a 26% growth in the reported period from a year ago.
According to ITV’s CEO Carolyn McCall, the firm’s online viewing was up 39% in the nine months. ITV’s video-on-demand advertising revenue climbed 54% over the period on the basis of higher online views and the roll out of Planet V, an optimisation platform for advertisers.
The company expects to rope in the highest advertising revenue in ITV’s history in 2021 despite the lockdown in the first quarter, on the back of its broadcast and ITV Hub’s mass simultaneous reach.
Shares of the company may have plunged 26.7% over the past five years, but on a year-to-date basis, the stock has surged 16.6%. The stock has a consensus rating of ‘Buy’ according to the data aggregated by MarketBeat, with three analysts giving it a ‘Buy’ recommendation and two rating it as a ‘Hold’. Analysts hold a current consensus price target of 138.75p, ranging from the low of 109p to the high of 176p.
British engineering company Rolls-Royce Holding (RR) is the fourth-cheapest stock on the FTSE 100, with a market capitalisation of £12.04bn. The luxury auto and engines maker may be gaining the momentum based on the number and volume of deals the firm has garnered in November alone.
Rolls-Royce signed a TotalCare agreement with Istanbul-based MNG Airlines on 16 November for the Trent 700 engines that power the MNG Airlines A330 freighter fleet. On the same day, Rolls-Royce also announced that it would continue to support Airbus in the United Arab Emirates, as its Rolls-Royce Trent 700 engine is set to power a further two multi-role Tanker Transport aircraft.
Shares of the firm may have plunged 37.8% over the past five years, yet the stock has surged 36.1% year-to-date. Rolls-Royce has a consensus analyst rating of ‘Hold’, with one ‘Buy’, two ‘Hold’, and one ‘Sell’ rating according to MarketBeat data. The stock holds a current consensus price target of 121.5p with the low price target of 80p and the high of 160p.
Taylor Wimpey (TW), one of the largest British residential developers, is the fifth-cheapest stock on the FTSE 100 at present. The homebuilder has a market capitalisation of £5.72bn and has been in the news lately, owing to its several charity initiatives and work in the area of sustainable transport choices.
The firm announced that it installed 47 electric vehicle-charging stations at Montague Place in Guildford, Surrey. The property company is committed to installing 36,000 electric vehicle-charging points by the mid-2020s.
Taylor Wimpey reported record performance in the half-year ending on 4 July. The housebuilder had a strong margin performance with first-half operating profit margin of 19.3%, benefitting from the completion of 7,303 homes during the period, excluding joint ventures.
The company has a consensus rating of ‘Buy’ based on nine analysts' views according to the data aggregated by MarketBeat, with nine ‘Buy’, zero ‘Sell’, and zero ‘Hold’ ratings. The stock holds a current consensus price target of 203.25p, ranging from the low of 193p to the high of 215p. The stock’s price performance remains unchanged over a five-year period and it has declined 3.1% on a year-to-date basis.
When picking cheap stocks with potential, traders may first check the relative strength index indicator (RSI) and whether the shares are oversold. Next, please take into account the company’s overall financial health and the stock’s fundamentals. Ensure to note the stock’s performance over the long term, ideally over a five-year period or longer, before investing. And never invest or trade money you cannot afford to lose.
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