This year’s stock market crash has thrown up a wide array of cheap shares. Today, I’m looking at three FTSE 100 firms — all leaders in their industries — currently trading at knockdown prices.
The Footsie ended last week back below 6,000 points, and volatility could continue in the short term. However, if your investing horizon stretches beyond the current decade, I reckon these three stocks could help you get rich and retire early.
Let’s drink to cheap shares!
Diageo (LSE: DGE) is the world’s largest spirit producer. It owns many historic brands, like 200-year-old Johnnie Walker whisky. It also selectively acquires newer, upcoming brands. For example, it recently announced it’s buying Aviation American Gin. In addition to spirits, it owns a number of strong beer brands, including Guinness.
Diageo had a long record of growth before the Covid-19 pandemic struck. However, it reported a 16.4% hit to underlying earnings for its financial year ended 30 June. This was because lockdowns had a significant impact on sales to pubs, restaurants and so on. Travel retail was also severely impacted by restrictions.
At a share price of 2,509.5p (a 31% discount to last year’s high), the market’s valuing DGE at 19.2 times its pre-pandemic earnings. I see this as a cheap rating for an outstanding, brand-rich business. With it also offering a running dividend yield of 2.8%, I rate the stock a long-term buy.
Another stock market crash bargain
BAE Systems (LSE: BA) is the UK’s biggest defence firm, and is the predominant supplier to the UK Ministry of Defence. It’s also a supplier to other countries, notably the US, Australia and Saudi Arabia.
The company reported a relatively robust performance in the first half of the year. And management expects just a mid-single-digit percentage fall in underlying earnings for calendar 2020. At 519.6p, the shares are at a 22% discount to their pre-pandemic level. They’re valued at about 12 times the indicated 2020 earnings, and carry a nice running dividend yield of 4.5%.
To maintain effectiveness, defence and security products need to be regularly upgraded or replaced with more advanced kit. BAE, with products and services across air, maritime, land and cyber, is strongly positioned as a trusted partner of allied governments. As such, I reckon the shares are a great long-term buy for investors aiming to get rich and retire early.
Cheap shares #3
Tesco (LSE: TSCO) is not just the UK’s biggest supermarket chain, but the biggest by far. As the Covid-19 pandemic struck, it used its might to double its online capacity in just five weeks, and to rapidly transform its stores with extensive social distancing measures.
The costs of doing this were significant and only partly offset by business rates relief and increased volume. However, I think it was a smart move by Tesco for the longer term. Alongside its first-quarter trading update, it published a one-off additional information pack. Among many positives, it showed the company had upped its share of the online market to 33.5%. It also showed impressive metrics on brand perception.
At 218.7p, Tesco’s shares are at a 16% discount to their 52-week high. They’re priced at 11.9 times pre-pandemic underlying earnings, and carry a running dividend yield of 4.2%.
I think this is another market-leading FTSE 100 business whose shares are cheap. As such, I’d be happy to buy the stock for the long term.