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2 cheap shares I’d buy in the latest FTSE 100 stock market rally

Kirsteen Mackay
·3-min read
Screen of price moves in the FTSE 100
Screen of price moves in the FTSE 100

US biotech firm Moderna’s breaking news about its Covid-19 vaccine with a 95% success rate has further boosted a stock market rally that was already gaining ground in November. The FTSE 100 has surpassed a five-month high and investors are going wild, snapping up cheap shares in the battered index.

FTSE 100 stocks to buy and hold

The vaccine results come during phase 3 of its trial, hot on the heels of pharma giant Pfizer and its German biotech partner BioNTech’s news of a vaccine with a 90% success rate. Considering the flu vaccine is between 40% and 60% effective, while chickenpox and measles vaccines are greater than 90% effective, this is promising.

I love a buy-and-hold approach to stock market investing, bagging bargains at knock-down prices and keeping them for years to enjoy capital growth and dividend income. So, while the FTSE 100 is rallying and investors are rushing to grab cheap shares, I’d consider buying GlaxoSmithKline (LSE: GSK) and Glencore (LSE:GLEN).

Cheap shares in focus

GSK is an international pharmaceutical giant specialising in treatments for some of the planet’s most overwhelming health problems. These include vaccines against childhood illness and infectious diseases, or treatments for cancer, respiratory disease and HIV/AIDS. GSK is at the heart of a burgeoning industry where research and development is key to continued growth and breakthrough discoveries. Health and wellness have never been more important to society as populations live longer and want to be as fit and active as possible. This is where GSK’s strengths lie, and I believe this will be reflected in its future growth.

It’s a world leader in research and its expertise should stand it in good stead in ongoing Covid-19 research. My colleague Alan Oscroft also rates the GSK share price with this reason in mind. Today, GSK has a price-to-earnings ratio (P/E) of around 15. This is not in the traditionally ‘cheap shares’ category, but in a market where peers are achieving a P/E of 109 (AstraZeneca) and 232 (Abcam), it looks cheap to me.

Market rally gives energy stocks a boost

Mining giant Glencore has several facets to its business, one of which is marketing commodities. This marketing division has done particularly well recently. Commodities markets are cyclical and often subject to periods of boom and bust. The Glencore share price has been on a slippery slope since 2018, but lately it has risen again.

FTSE 100 cheap shares: Glencore sees production improving.
FTSE 100 cheap shares: Glencore sees production improving.

Source: Glencore

I think Glencore looks to have strong recovery potential for the long term. It has a forward P/E of 12 but cancelled its dividend earlier this year to focus on reducing net debt. It hopes to reach its target net debt of less than $16bn by the end of the year. I imagine its share price will make a rapid recovery once it reinstates its dividend.

The energy part of its business includes oil products, thermal coal, and natural gas. With energy prices being hard hit this year, I think it’s an area that will rebound swiftly once normality returns to international travel. Some of Glencore’s offerings are highly sought after in the manufacture of electric vehicles and renewable infrastructure. These desirable sectors have been building momentum, and that looks set to continue.

GSK and Glencore are cheap shares I like the look of. I would consider adding both to a long-term portfolio of quality FTSE 100 stocks.

The post 2 cheap shares I’d buy in the latest FTSE 100 stock market rally appeared first on The Motley Fool UK.

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Kirsteen owns shares of GlaxoSmithKline. The Motley Fool UK has recommended Abcam and GlaxoSmithKline. 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