Standard CharteredStandard Chartered * Valuation: Attractive price-to-earnings ratio of around 6 and price-to-book ratio of 0.6. * Growth potential: Strong presence in Asia, a rapidly growing region with rising personal wealth. * Dividend yield: Close to 3%. Barratt Developments * Market position: UK’s largest residential developer, giving it a strong competitive advantage. * Demand-supply dynamics: High demand for homes due to population growth. * Valuation: Price-to-earnings growth ratio (PEG) of 0.7, indicating potential value. * Dividend yield: Close to 6%. Both companies offer compelling investment cases based on their valuations, growth prospects, and income generation potential. However, investors should also be aware of the risks associated with these stocks, particularly the impact of China’s economic issues on Standard Chartered and the potential impact of stubborn inflation on Barratt Developments.
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Economic volatility has hurt many FTSE 100 stocks recently. The good news for investors like me is that there are now plenty of top-notch stocks on the UK’s premier index trading at a discount.
Two picks I’m eyeing up are Standard Chartered (LSE: STAN) and Barratt Developments (LSE: BDEV).
I’d love to buy some shares in both picks when I next have some free funds, before they climb. Here’s why.
Standard Chartered
Many financial services stocks have had a tough time of things lately due to global volatility including rampant inflation. Plus, geopolitical issues haven’t helped either.
Asia-focused banks like Standard Chartered have also suffered due to the economic issues in China, one of the world’s largest economies. This is one of the biggest risks for me to bear in mind as I’m bullish on the shares. Lower than expected growth in the country has hit many industries hard, and could hurt Standard Chartered’s earnings and returns moving forward.
However, on the other side of the coin, from a long-term view, there’s a pretty compelling investment case for me. To start with, the shares look dirt-cheap to me using two key metrics. The shares trade on a price-to-earnings ratio of just over six. From a price-to-book ratio (P/B), a reading of 0.6 suggests value, as readings below one can indicate this.
Away from valuation, the shares currently offer a dividend yield of close to 3%. Although I’m aware that dividends are never guaranteed, the opportunity of a passive income sweetens the investment case.
Finally, Standard Chartered’s growth potential is what excites me most. With its well-established presence in Asia, and the potential for its services to be in high demand due to a rising population and increasing personal wealth, there are positive signs ahead. Standard Chartered’s earnings and returns could soar. Plus, I can see the shares climbing too, providing capital growth too.
Barratt Developments
Like financial services, the housing market has also been in a malaise due to high inflation, high interest rates, and a cost-of-living crisis. Due to these issues, completions, sales, and margins have come under pressure.
From a bearish view, stubborn inflation could be a risk to earnings and returns for Barratt, and other builders, moving forward. This is because the Bank of England may not trim interest rates, which could prompt new buyers, and stimulate the market generally. I’ll keep an eye on this moving forward.
From a bullish view, demand for homes is outstripping supply in the UK. As the population is rapidly rising, this demand will need to be filled, which provides Barratt the opportunity to grow earnings, as well as returns, for years to come.
Next, Barratt’s market position as the UK’s largest residential developer is hard to ignore. It possesses the presence, know-how, and track record to capitalize on positive sentiment.
Finally, the shares look cheap to me. Using a different metric in this instance, Barratt shares trade on a price-to-earnings growth ratio (PEG) of 0.7. Similar to the P/B ratio, a reading below one indicates value for money. Plus, a chunky dividend yield of close to 6% sweetens the investment case. I can see this growing over time too.
