U.K Market Commentary. 2003-03-13
In our opinion there are many companies in the FTSE 100, that now represent excellent buying opportunities.
FTSE 3,287: Time To Buy?
Last night, the FTSE 100 closed at 3,287, the lowest it has been since June 1995. At this level, the dividend income from the blue chip index is 4.23%. This is now, higher than the 4.06% available from
10-year gilts. The last time the market yielded more than government bonds was during the 1973-1974 bear market. In hindsight this proved to be a great long-term buying opportunity.
In amongst the FTSE 100, numerous shares look extremely attractive for the longer term. One such example is Glaxo SmithKline (LSE: GSK). At yesterday's l,000p the pharmaceutical giant trades on a forward price to earnings(P/E) ratio of 12 and yields 4%. Given the long-term growth prospects of pharmaceuticals,GSK looks an absolute bargain, at this price.
The Oil & Gas sector also has some bargain stocks.
BP(LSE:BP)(NYSE: BP) at 371p and Shell (LSE:SHEL) (NYSE: SC) at 333p both trade on prospective P/Es of around 12 and offer dividend income of over 4%.
These reliable blue chip stocks have not been this cheap for a decade. They too are extreme bargains right now.
The Banking sector has had it's detractors lately. Some Banks are rumoured to be having a few problems, but recent earnings results showed that many are still making steady progress. All the Banks trade with single-digit P/Es. The pick of the bunch is probably Barclays (LSE: BARC) , yielding an historic 5.9%, HBOS(LSE:HBOS) (563p,yield of 5.2%), Alliance & Leicester (LSE:AL) (719p, yield 5.6%), Northern rock (605p,yield 3.3%) and Bradford & Bingley (LSE:BB) (267p,yield 5.5%).
If you are looking for income Lloyds TSB at 320p(LSE:LLOY) yields a whopping 9.7%!
In other sectors there are plenty of steady and proven companies that are boasting ludicrously cheap ratings.
At 578p, Sainsbury (LSE:SBRY ) offers a juicy 5.6% yield, while Tesco(LSE: TSCO),at 163p and forecast to grow profits by around 12% in 2003, currently stands on a P/E of 12 and yields 3.8%.
Meanwhile,Cadbury Schweppes(LSE: CBRY) at 301p languishes on a P/E of 10 and provides a 4% yield.
Allied Domecq (LSE: ALLD) at 261p has P/E of 8 and offers a 5% dividend yield.
The major stock markets have seen turbulent times before, but recovered and prospered thereafter every time. The course of the FTSE 100, will by no means be a steady upward path. There will be plenty of volatility along the way, but if you can summon up the courage to buy selective companies at these bargain prices,there are good dividends to enjoy whilst you await the long term Capital appreciation
which must surely follow.
FTSE at 3,287 is a fantastic long-term buying opportunity.