Since I’m in the process of moving house, I’m not planning any major investing moves this month. But I plan to reinvest some dividends, and some FTSE 100 stocks look like bargains to me right now.
The FTSE 100 might seem like a strange place to be looking for cheap stocks. The index has fallen by just over 6% since the start of the year, compared to a 25% decline for the FTSE 250 and an 18% fall for the S&P 500.
Nonetheless, I think that there are some great opportunities in the UK’s larger index at the moment. If prices stay where they are, I’ll be buying these stocks in November.
I’m looking to take advantage of rising interest rates this month. Since the start of the year, the Bank of England has increased rates from 0.25% to 2.25%.
This is having two significant consequences. Borrowing money is more expensive and saving money is more rewarding.
An important area that this affects is the housing market. Higher borrowing costs make mortgages more expensive, causing house prices to fall as moving house becomes more costly.
As a result, shares in companies that make money from the property market have been falling. And I think that there are two that are bargains at the moment.
Top of my list is Rightmove (LSE:RMV). The Rightmove share price has fallen from £7.90 at the start of the year to £4.93 at the moment.
That’s a decline of around 38%. And at these prices, I think that Rightmove shares could be a great stock for me to buy in November.
A slowdown in the UK property market is undoubtedly a risk for Rightmove. But I think that this will prove to be a temporary headwind.
Over time, I expect the property market to recover. And when it does, I think that Rightmove’s dominant market share and strong cash generating ability will provide a good investment return.
Experian (LSE:EXPN) is also on my list of stocks to buy in November. Experian shares are down 24% since the start of the year.
Lower mortgage demand is likely to mean lower demand for Experian’s services. But I think that the market in general is being too pessimistic about the company’s prospects over the long term.
As with Rightmove, there’s a risk that a prolonged period of high interest rates could dampen demand for Experian’s services. But I think that currently the share price offsets this risk.
At the moment, the 10-year UK government bond has a yield of just under 3.5%. By my calculations, Experian shares have a free cash flow yield of 4.3%.
I think that means that Experian shares can be expected to provide a better return than a government bond over the next decade. That’s why I’m looking to buy the stock this month.
FTSE 100 bargains
Rightmove and Experian both look like bargains to me at their current prices. In both cases, I think that the market is overreacting to some short-term headwinds.
There’s an interest rate decision on Thursday that I’ll want to keep a close eye on. But I’m looking to buy both stocks this month.
The post 2 FTSE 100 bargains on my list of stocks to buy in November appeared first on The Motley Fool UK.
Stephen Wright has positions in Experian and Rightmove. The Motley Fool UK has recommended Experian and Rightmove. 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 2022