Investor sentiment has taken a beating in the last few years. But as they say, every cloud has a silver lining. With that, I’m on the hunt for value shares.
While many shares have seen their prices pulled back significantly, I see this as an opportunity. Valuations have sunk to levels that investors haven’t seen for some time.
Here are two value stocks I’d buy today.
Banking giant
Let’s start with Barclays (LSE: BARC). It’s been a volatile 12 months for the stock. A year ago, a share would have cost me 158p. In early February, I would have had to fork out nearly 190p! However, today I can grab a share for just 140p.
Barclays, in my opinion, is a prime example of an undervalued share that presents a buying opportunity. First of all, it looks dirt cheap. It has a price-to-earnings (P/E) ratio of just four. What’s more, its price-to-book ratio sits at a mere 0.3.
With a dividend yield of 5.5%, I also like the opportunity for passive income. As I continue to build up my investment pot, I’m keen to purchase shares that provide additional income and reinvest the dividends to grow my pot quicker. With its yield covered over five times by earnings, I’m confident of a payment.
Many banking stocks have been hit heavily this year. And Barclays is no exception. It’s benefited from higher interest rates, as this has pushed up its net interest margin (NIM). But with it recently downgrading its prediction for NIM to come in between 3.05% and 3.1% from a previous 3.15%, it may be that the impact of rising interest rates has run its course.
Regardless, that’s a short-term issue. And in fact, lower borrowing costs could provide a boost for the housing market.
Telecoms stalwart
Like Barclays, it’s been a rollercoaster year for the second stock on my list, BT (LSE: BT.A). It’s down just 1% in the last 12 months. But within this timeframe, it’s reached highs of 166p and lows of 109p.
Nevertheless, I sense a bargain. A P/E ratio of around six is half that of the FTSE 100 average. With a yield of 6.3%, covered over two times, it’s another opportunity for me to generate some extra cash.
A big issue is debt. Currently, it sits at £19.7bn, up £0.8bn from its previous update in March largely due to pension scheme contributions. This is a sizeable pile. And the current economic environment and higher interest rates will further inflate the issue.
Regardless, a positive set of first-half results has seen its share price stage a recovery in the last month. In the update, CEO Philip Jansen stated that the “BT Group is delivering and on target” – a message long-term shareholders have been waiting to hear. They’ll also be pleased to hear it’s on track to meet its £3bn a year savings target by 2024.
BT looks like it’s heading in the right direction. And I think now could be a smart time to buy. If I had the spare cash, I’d strongly consider buying both BT and Barclays today.
The post Here are two of my favourite value shares right now! appeared first on The Motley Fool UK.
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If I’d put £10k in BT shares 5 years ago, here’s how much I’d have now
Charlie Keough has positions in Barclays Plc. The Motley Fool UK has recommended Barclays Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
