Investors should buy these FTSE 100 stocks before they surge!

FTSE 100 The stock has been pushed up in recent months. This was prompted by improved macroeconomic forecasts and positive comments about Rishi Sunak’s premiership. Not for dot workers, but Sunak’s quiet pragmatism has done wonders for confidence in UK stocks.

Today I look at two FTSE 100 stocks that are still trading significantly below what they were two or three years ago.

Hargreaves Lansdowne

Hargreaves Lansdowne (LSE:HL) is the UK’s leading investment platform provider. It also offers financial services to its clients.

The stock was on a fairly steady upward trend in the years before the pandemic. However, the Covid-19 lockdown sent investor activity into overdrive and the Bristol-based company’s share price rose, reaching above 2,200p.

But pandemic-era growth has proven unsustainable as economies reopen and people return to work. Stocks, like other growth and technology stocks, have become very expensive. The company is currently trading at less than 850p, and is valued at around 15.

However, for me, the stock is currently very undervalued. Even during the cost of living crisis, the company produced positive results. Net new business is down 30% to £1.6bn, but we are in the middle of a depression. Higher interest rates helped revenue grow by 20% and the company increased its active clients by 31,000 in the last half year.

In the near term, I expect interest rates to rise further. But in the long term, Hargreaves will continue to attract customers as more and more Britons manage their own portfolios.

Rolls-Royce

Rolls-Royce (LSE: RR) has risen in recent months, but is still well below pre-pandemic levels.

The company, which derives more than a third of its revenue from large-engine flying hours, is suffering from the pandemic. It sold off business units and went through an efficiency drive to pay off debt and reduce overheads.

But Rolls surprised investors last month with better-than-expected results. It has a statutory operating profit of £837m by 2022, up from £513m a year earlier. Revenue rose to £13.5bn from £11.2bn. Rolls said it expects revenue of around £800m-£1bn this fiscal year.

Yes, there is still a long road ahead for Rolls’ recovery. However, it is now back in the black and debt should begin to decline to manageable levels if civil aviation continues to recover. “In 2023, we assume large engine flying hours at 80-90% of 2019 levels and total shop visits of 1,200-1,300“, the company said in the report.

The business has also seen strong growth in two other key business segments. Order growth in the power systems segment was up 29% to £4.3bn. The defense is progressing well, the business said.

Metrics are also starting to improve, the company has a price-to-sales ratio below one and future earnings potential is good with the current stock price.

I continue to buy Rolls-Royce shares because I think the company has recovered more than its share price indicates. Stocks down 50% in five years.