2 cheap FTSE 100 stalwarts that I think are market-crash opportunities
The Motley Fool
Published May 26, 2020 11:17
Updated May 26, 2020 11:40
2 cheap FTSE 100 stalwarts that I think are market-crash opportunities
Buying cheap FTSE 100 shares after the recent stock market crash may not sound like a good idea right now. After all, the economy is likely to face continued uncertainty in the short run.
However, there may be opportunities for long-term investors to snap up bargains in the market today. With many blue-chip stocks trading on low valuations, they’ve the potential to produce strong returns over the coming years.
Here are two FTSE 100 dividend champions that appear to offer wide margins of safety right now.
FTSE 100 value stock Aviva (LON:AV) Recent trading updates from Aviva (LSE: AV) show the FTSE 100 insurance group has been able to continue to operate despite the coronavirus pandemic.
While the company thinks it’ll have to pay out £160m of claims related to the pandemic, management is confident the business can afford this expense.
With Aviva’s balance sheet relatively healthy, it appears to offer less risk than many of its sector peers. And customers are still turning to the business to provide their insurance needs.
During the first quarter of 2020, general insurance sales increased 3%, and life insurance new business increased by 28%.
Of course, the value of new business could drop over the next few months as the UK economy struggles with the pandemic’s fallout. However, at current levels, it looks as if investors are already pricing in the worst-case scenario for the company.
Shares in the FTSE 100 stalwart are trading at a price-to-book (P/B) value of just 0.6. That suggests the stock offers a wide margin of safety at current levels. As such, the FTSE 100 company could deliver healthy long-term returns.
Legal & General Group (LON:LGEN) Another FTSE 100 share that appears to have substantial long-term recovery potential is insurance company Legal & General Group (LSE: LGEN).
Like FTSE 100 peer Aviva, Legal expects to see a significant financial impact from coronavirus. Furthermore, it anticipates coronavirus will continue to impact on its business prospects for some time.
Nevertheless, the company is well capitalised with a strong balance sheet, and it continues to win new business. With these strong fundamentals in place, management has decided to maintain the firm’s dividend policy.
Unlike other FTSE 100 stocks, L&G announced a 7% increase in its final dividend for 2019. At a time when many other FTSE 100 income champions are cutting dividends, this is a positive mark for the business.
Despite this development, the stock’s decline of 33% since the beginning of 2020 highlights investor sentiment is extremely weak. This could persist in the short run, but it could present long-term investors with an opportunity to buy a high-quality business while the shares offer a wide margin of safety.
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As well as its capital gains potential, after recent declines, shares in the FTSE 100 group support a dividend yield of nearly 10%. Therefore, it looks as if investors will be paid to wait for the firm’s recovery.
The post 2 cheap FTSE 100 stalwarts that I think are market-crash opportunities appeared first on The Motley Fool UK.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.
Motley Fool UK 2020
First published on The Motley Fool
Written By: The Motley Fool
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