I’m searching for the best cheap FTSE 100 stocks to buy for my shares portfolio in April. Here are three that are on my watchlist today.
Is fast-fashion in peril?
Fast-fashion businesses like Associated British Foods‘ (LSE: ABF) Primark face increasing costs as the fight for improved sustainability ramps up. Does this make this particular FTSE 100 share a risk too far? I’m not so sure.
A wealth of data has emerged showing how consumers are reducing their wardrobe sizes to help the environment. It’s a trend that threatens to derail ABF’s growth potential.
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Things could get even worse for value chains like Primark too if legislators tighten rules governing eco-design. In recent days the EU Commission floated new rules to promote the use of recyclable materials and clothing that, in its own words, “last longer than three washes”.
A FTSE 100 bargain
This environmental drive threatens to smack revenues and push up costs for the likes of Primark. Still, I think this long-term risk is baked into ABF’s rock-bottom share price. Today, the FTSE 100 firm trades on a forward price-to-earnings growth (PEG) ratio of just 0.2.
Any reading below 1 suggests that a stock could be undervalued. I certainly think this low ratio fails to reflect ABF’s bright outlook for well into the second half of this decade.
You see Primark’s global expansion scheme has plenty of gas left in the tank. And judging by the success of store rollouts, I believe profits could continue to bulge as expansion continues internationally.
ABF has opened almost 30 new stores in the past two years alone.
Sales have been particularly strong in the US, by far ABF’s best-performing territory. Pleasingly, Primark is set to speed up its expansion here especially and plans to have 60 stores up and running across the pond by 2027.
A cheap UK share I already own
There’s still no signs of slowdown in the UK housing market. Consequently, I believe that FTSE 100 stocks like Barratt Developments (LSE: BDEV) remain great buys today.
I’m not going to say that homes demand in Britain will remain robust. The Bank of England (BoE) could seriously step up interest rate hikes in the months ahead, given the rate at which inflation is rising.
Consumer price inflation in the UK hit 30-year highs of 6.2% in February. And it’s expected to get much worse as 2022 progresses. A flurry of BoE rate rises could hit mortgage affordability for many prospective homebuyers extremely hard.
7.4% dividend yields
I’m not minded to sell my own holdings in Barratt Developments just yet however. In fact, I’m considering adding more of the FTSE 100 business to my shares portfolio, given its excellent all-round value.
Today, Barratt trades on a forward PEG ratio of just 0.3. But this is not all. At current prices, the builder carries a meaty 7.4% dividend yield. That’s more than double the broader 3.5% average for a lead index share.
Fresh news from the UK housing market provides encouragement that it will remain rock-solid in 2022, at least. According to Nationwide, the average UK home price rose 14.3% year-on-year in March.
This was the fastest rate of growth since 2004. There simply aren’t enough homes to go around in the UK, meaning property values keep soaring at a stratospheric pace.
It’s also why Barratt announced late February that it continues to witness “strong market demand” for its newbuilds.
This is a phenomenon I expect to continue long into the future too. Successive governments have failed to build the number of new homes needed to meet rocketing demand. Indeed, latest Office for National Statistics data shows the number of new home builds fell 2.4% year-on-year in the final quarter of 2021.
I expect this lack of joined-up housing policy to keep driving property values (and consequently profits) at Barratt higher long into the future.
The military heavyweight
The increasingly feverish nature of global politics means that buying BAE Systems (LSE: BA) could also be a great idea this April.
Businesses like BAE Systems play a crucial role in helping Western governments reduce the threat of perceived hostile states. It’s perhaps no surprise that this particular FTSE 100 share has soared in value since Russia invaded Ukraine.
The prospect of a ‘Cold War 2.0’ has raised the sales outlook for the entire defence industry considerably.
NATO member Germany has vowed to step up military spending. US President Joe Biden is also planning to significantly boost his country’s arms budget following events in Eastern Europe.
But concerns over Russia aren’t the only drivers for increased defence spending. The US, for instance, is also worried by Chinese expansionism in the South China Sea.
Global giant
All of this bodes well for BAE Systems, of course. Not only is the business a major hardware supplier to the US and UK, it also sells a lot of product in Australia and Saudi Arabia.
I like BAE Systems because its large product stable boosts its growth opportunities and reduces reliance on one or two segments. The firm builds planes, ships and land vehicles; provides intelligence to government agencies; manufactures mobile communication systems… the list is vast.
I also like the company’s position as a key supplier to Western militaries. This could change if a catastrophic failure of its systems results in loss of life or serious mission failures.
However, as things stand today, its strong relationships with major armed forces provide an extra layer of security for investors.
Today, BAE Systems trades on a forward P/E ratio of around 14 times. This might not look jaw-droppingly cheap on paper, but I think it makes a stock of this calibre a serious bargain.
