3 cheap shares I’d buy in February

At FTSE 100 still has plenty of cheap stocks to tempt investors despite the strong rally over the past three months.

Below are three stocks that have caught my eye. I added it to my watch list with the intention of buying it when I have the money.

These FTSE 100 stocks are not expensive

At Barclays The change in BARC stock price for the last period is +23.64%. But over a longer period of time it is still besieged, as a decrease of 8.73% was measured in one year. Over five years, it is down 11.66%.

But Barclays still looks cheap. It has a low price-to-book value of only 0.4 (one figure is considered fair value). The price-to-earnings ratio is also low, at just five times earnings (versus 15 for fair value).

It’s a bumpy time for banks, as they weather the housing price crash and recession. On the plus side, higher interest rates allow them to expand their net interest margins. The difference between what they pay for savings and pay off debt.

Barclays currently yields 3.3%, which is expected to rise to 4.8%. With a cap of 3.7, the dividend has more scope to grow, making it a low dividend income stock.

I will also take a chance on it BT Group (LSE: BT.A), which currently trades at just 6.4 times earnings. Investors have been scared to death by the year’s underperformance, with shares down 32.89% over one year and 50.14% over five.

BT has been mired by falling profits, high net debt, labor unrest, and fierce competition from rivals. You will also need to finance huge capital expenditures for fiber infrastructure and mobile networks.

Another well-priced income stock

But if it still pays an attractive 6% yield, guaranteed 2.7 times by earnings. BT faces challenges but for long-term buy-and-hold contrarian investors like me, the risk is worth taking. I will reinvest the dividends to build my stock while I wait for the recovery.

Hindsight is a wonderful thing. I have to buy a supermarket chain Sainsbury’s (LSE: SBRY) three months ago, as it is up 30.63% since then. But over a year, the stock price is still down 14.3%, and 2.36% over five years. So it’s arguably still cheap.

The grocery sector is currently struggling, as supermarkets are forced to cut prices due to the cost of living crisis. All the while, Aldi and Lidl keep gobbling up market share.

Linking up with Argos didn’t quite produce the expected change, and now the management is offering the best in the Just Eat home delivery service. Sainsbury’s indicated it still had a record Christmas, and full-year pre-tax profits are now expected to end up in a forecast range of between £630m and £690m.

That makes the current price of 9.9 times look even better. The big attraction is the dividend. Sainsbury’s currently yields 5.2%, covered 1.9 times earnings. That’s more than any cash account will ever pay me.

Buying cheap stocks is always risky, but I’m investing for the long term and February seems like a good time to get stuck in.