The FTSE 100 is still full of cheap shares despite this year’s surge and I’m ready to buy more

In October, the FTSE 100 full of cheap shares that I started on a buying spree, and I’m glad I did.

I got the timing right, for once. I bought a house persimmon on October 13, the day the FTSE 100 general meeting began. The index was at 6,707, but on Friday closed at 7,845, up 17%, adding £321bn to its value.

My stock picks have done better. Persimmon rose 21.38%, while two purchases I made in the first week of November, Rio Tinto and Rolls-Roycehave jumped 19.81% and 31.01% respectively.

I like to buy cheap stocks

I target all three because they look dirt cheap, with a P/E ratio in the low single digits. The FTSE 100’s recent jump is a double-edged sword, though. While boosting the value of existing holdings, it also makes the next purchase more expensive. I want to buy FTSE 100 shares cheaper, but is the offer now gone?

Thankfully, a quick search shows there are still plenty of potential deals out there. Among the stocks I have been thinking of adding to my portfolio, I can see Barclays still trades at just 4.7 times earnings. That despite the fact that shares have rocketed by a third since October 13, when Persimmon itself is still cheap at 5.6 times.

Other cheap stocks on my wish list that trade at single digit P/E are included Anglo American (6.1 times earnings), Taylor Wimpey and BT Group (two 6.3 times), Lloyds Banking Group (6.5), Kingfisher (7.5), Imperial brand (7.8), Aviva (8.0) and Sainsbury’s (9.6).

There was more trading at the same level, so it looks to me like the FTSE 100 is still full of cheap stocks, so I missed it.

Of course, cheap doesn’t always mean good. Quite a few of the businesses I have listed have similar challenges.

Still FTSE 100 deals out there

Also, there is no guarantee that a cheap stock will automatically perform better. Often they are cheap for a reason, say, because profits are falling, dividends are in danger, management is out of depth, or for countless other reasons.

Before buying any stock, I always read the company’s latest trading reports and reports, and take a skeptical view of the business. Macro events may play a role in performance. Mining stocks like Anglo American could struggle if the Covid lockdown causes more damage to China’s economy, for example. Taylor Wimpey is exposed to the fortunes of the UK housing market, which is currently faltering.

So it’s not just a case of diving into cheap stocks and hoping for the best. Even after doing my job, it could be wrong. It is impossible to know everything about a business before buying, and macro events cannot be predicted with certainty. Who saw the price of oil last year that rocketed, and then fell?

I’m glad to see the FTSE 100 is still full of cheap targets. The next question is who buys first. I am spoiled for choice.