I’m always on the lookout for cheap shares. And right now, there are plenty of discounted stocks on the FTSE 100 and FTSE 250. But that might not be the case for much longer. Research from the Economic Forecast Agency (EFA) suggests that the FTSE 100 could push as high as 8,507 in January.
That’s a 13% increase from the current position. The agency’s data suggests the index could reach its 2023 peak in January under its current, although regularly updated, forecast. In fact, in its most optimistic scenario, the EFA sees the index pushing above 9,000 in 2024 — huzzah!
So, does this mean time is running out to pick up cheap shares? Let’s find out.
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Uneven recovery
Indexes rarely grow evenly. And that’s certainly been the case this year. We’ve seen oil and resource stocks surge — these company’s are disproportionately represented on the FTSE 100.
However, many UK stocks have underperformed. Sectors such as housebuilding, retail, manufacturing, and banking have faired poorly in comparison to resource stocks. So, it’s clear that a surging FTSE 100 doesn’t necessarily mean that the all UK stocks will push upwards.
But, if the FTSE 100 is going to soar above 8,500 in the next two months, it seems unlikely, to me anyway, that the growth is going to come from oil and resource stocks. For one, a global economic slowdown does not represent optimal conditions for these stocks to grow.
Instead, I see the growth coming from currently depressed areas of the market. But it’s all dependent on economic and company performance data.
Buying cheap stocks while I can
Could this be the opportune time to buy housebuilding stocks? It definitely could be the case. As a long-term investor, I’m always looking out for good entry points.
Vistry Group (LSE:VTY) is a stock I’m looking closely at. It’s currently down 43% over 12 months amid broad concern for the health of the housing market as interest rates go sky high.
However, there are reasons for optimism. In October, Barclays said that “house price growth remains positive over the forecast horizon [to 2026]”. Continued house price growth is needed to mitigate the impact of rising building costs, which are set to increase by 5% year on year.
I’m also expecting a low volume of new builds in recent years to help sustain house prices in the near term. After all, there is an acute shortage of housing in the UK and there has been for decades. Vistry trades with a price-to-earnings ratio of just five — that is very cheap.
I already own some Vistry shares, but I’d buy more. The near term might be a bumpy ride, but, as a value investor, I find the current entry point very attractive.
I’m also revisiting airline easyJet. It’s been in my portfolio for a long time, but, naturally, it’s not done well. Travel stocks remain some of the most discounted on the index. While 2022 hasn’t represented the recovery we were all hoping for, demand remains robust. I’m buying more easyJet stock as I’m forecasting a better 2023 for the aviation industry.
