After Russia launched a full-scale invasion of Ukraine, stock markets had a mini-meltdown yesterday. From high to low, the FTSE 100 index’s range was almost 295 points (4.1%). However, the Footsie is a long way from a full-blown stock market crash. As I write, it has lost under 300 points (-3.9%) from its 52-week high. Even so, yesterday’s heightened volatility threw up some bargains. Here are three FTSE 100 shares I don’t own, but would gladly buy today.
Cheap share #1: Lloyds Banking Group
On Monday, I wrote about Lloyds Banking Group (LSE: LLOY) with its shares at 50.83p. After Thursday’s mini-crash, Lloyds shares are now even cheaper. Yesterday, LLOY was a big FTSE 100 faller, dropping to 46p before recovering to close at 46.54p. Had I been home yesterday, I would have bought at these levels. However, as I write, the Lloyds share price has rebounded and trades at 49.16p, up 5.6% today. This values the Black Horse bank and its many subsidiaries at £34.9bn. I think that’s too cheap for a group with 30m customers that made £6.9bn before tax in 2021. The shares trade on a price-to-earnings ratio of 7.5 and an earnings yield of 13.3%. Based on the full-year dividend of 2p, the dividend yield is 4.1% a year — slightly above the FTSE 100’s cash yield. Although rising consumer prices and any economic pullback might hit Lloyds’ profitability, I’d still buy at these levels.
Discount stock #2: Rio Tinto
Global mining colossus Rio Tinto (LSE: RIO) is the second of my second cheap shares following yesterday’s minor stock market crash. At Thursday’s low, Rio shares dipped to 5,385p, before closing at 5,467p. Today, they have added another 9p (+0.2%) to 5,476p. This values the Anglo-American miner of iron ore, aluminium, copper, and lithium at £91.9bn, making it a FTSE 100 powerhouse. With metals prices soaring in 2021-22, Rio’s cash flow, profit, and earnings have soared. Nevertheless, its shares trade on a price-to-earnings ratio of 6.4 and an earnings yield of 15.5%. Furthermore, Rio’s dividend yield is 10.6% a year (more than 2.5 times the FTSE 100’s cash yield). Almost unbelievably, Rio’s total dividends for 2021 total $16.8bn (£12.6bn) — larger than many Footsie firms. Though my family portfolio will buy Rio shares soon, history has taught me that mining stocks can be highly volatile and risky.
Stock market crash share #3: British American Tobacco
The third and final of my cheap shares following yesterday’s short-lived stock market crash is British American Tobacco (LSE: BATS). As a leading global supplier of cigarettes and tobacco, BAT’s products are harmful and addictive. Hence, this cheap share is unpopular with ethical, social, and governance (ESG) investors. But a fifth of all adults still smoke (including me, alas). As a result, BAT generates huge cash flows and earnings. Yesterday, its shares dropped as low as 3,222.5p, before closing at 3,229.5p. As I write, they trade at 3,302.24p, up 2.3% today. This values the tobacco giant at £75.8bn. At this level, the shares trade on a price-to-earnings ratio of 11.3 and an earnings yield of 8.9%. They offer an attractive dividend yield of 9.84% a year, almost six percentage points above the FTSE 100’s yield. I’d buy BAT stock for these chunky dividends. However, this share is riskier than it looks, as BAT has over £40bn of net debt on its balance sheet!