I think the recent market slump which has seen the FTSE 100 fall from over 7,600 at the end of August to nearer the 7,200 mark has created some buying opportunities for long-term investors. In particular I think the decline has helped make these two shares potentially too cheap to miss out on.
Shares in soft drinks manufacturer AG Barr (LSE: BAG) have been pummelled after a profit warning in July and then the following wider market fall. It means the share price is down 24% during 2019 so far. Before the profit warning, the share price had been flying since the end of 2016, so investors had been liking what they’d been seeing from the company.
Although there’s the potential for more bad news from the firm, I think the shares do now look far cheaper than they have for a long time as the P/E is down to under 20.
The profit warning was largely blamed on the weather, although some products also underperformed. If the former really is to blame for the disappointing sales, then performance may well recover without the need for significant investment.
I think the ongoing popularity of Irn-Bru will keep the company in good shape while it addresses the challenges it has had with its Rockstar and Rubicon drinks ranges. Also, with many investors seemingly worried about more difficult economic times ahead, I think defensive stocks like beverage companies will become more popular.
The share price decline looks overdone to me and I think by historical standards the shares are looking cheap now and could be a good buy for a patient investor.
FTSE 100 telecoms giant BT (LSE: BT.A) has also not been having a good year with its share price down by 32%. Given that the company is now exceeding analysts’ expectations and has a new CEO, I think this fall looks overdone. Analysts at Jefferies have a price target of 325p on the shares against a current price which is near to half of that.
With a P/E of only six, I think expectations for BT are extremely low. That creates a situation where if the fairly new CEO can turn things around, then there could be a lot of upside for investors. For example, 5G creates an opportunity for EE – which BT owns – to increase revenues and profits and the company has successfully launched the UK’s first 5G mobile network in six cities.
The FTSE 100-listed company reported profit before tax of £642m for the three-month period ended 30 June, this was down 9% against the same period last year. But the telecoms company is on course to meet its full-year targets and the profit was greater than was expected – even though it fell.
Although I still have some concern that a dividend cut may be just around the corner at BT, overall I think it’s starting to look too cheap to ignore, as shown by the low P/E.
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Andy Ross has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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 2019