Did you stock up on cheap shares after the tech stock crash in the early noughties? Or how about at the depths of the banking crisis in 2009? Those were two golden opportunities, the likes of which don’t come along many times in one person’s investing lifetime.
But if you’re still investing with a decade or more to go before you want to start spending the cash, those are exactly the kinds of times you should be hoping for, because you get so many more shares for your money. And after each of those two past golden periods for buyers, the FTSE 100 has come storming back.
Great rebounds
Between March 2003 and June 2007, the UK’s biggest index almost doubled, and it did even better than that from the depths of March 2009 to April this year. Of course, trying to time the market is a mug’s game, but when we see prices tumbling again, its time to rejoice and get buying — and today we’re seeing the kind of buying opportunity that I really didn’t expect to come along again so soon.
It’s fear over China that’s done it, and the fact that the country is forecast to grow at only 6.8% in the coming 12 months. That’s punished oil companies and miners the hardest, but the rest of our blue chip stocks are trading at bargain prices too — they’re perhaps not as stupidly cheap as they were in 2003 or 2009, but the sales are definitely on again.
Where are the bargains?
After losing almost a third of their value since April, shares in BP can now be had for 324p and a forward P/E of 14 in a year when profits are expected to grow strongly again after the turmoil of the past few years. BP also provided a dividend yield of 6.3% last year, and is forecast to deliver more than 7.5% this year — that would not be covered by earnings and it could be cut a little, but cover will surely be regained soon and even with a cut there’d still be a handsome amount of cash handed out.
Things are similar at Royal Dutch Shell, whose shares are down 36% in a year to 1,544p. And they’re on a more attractive P/E than BP, of 12 and dropping to 11 for 2016. The predicted dividend yield is about the same, but Shell’s would be just covered by earnings.
Then what about the banks? Investors in Barclays, the one least hurt in the crash, are looking at forward P/E multiples of just eleven and nine for this year and next at a price of 247p, as profits recover and dividends start ramping up again. And over at Lloyds Banking Group, with the price having slumped 18% since early June to 74p, we’ve got multiples of around nine for the two years, with the resurgent dividend set to deliver a 5.4% yield next year.
Healthy dividends
And then there are the utilities companies, with dividend yields of better than 5% expected from National Grid and Centrica, and over 6% from SSE.
Insurance firms? RSA is on a P/E of only 12 at the start of its return to growing earnings and rising dividends, and Aviva‘s P/E is under 10 and falling, with dividends set to yield 4.6% and rising.
What you should definitely not be doing right now is running scared from top FTSE shares, because you might never have it so good again.