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Last month, the FTSE 100 the index reached an all-time high of 8,047.06 points. As I write, it is at 7,564.68, down more than 480 points (-6%) from its peak. However, many UK stocks have fallen harder than before. Here are five cheap stocks I already own, but would love to buy at a discount right now.
Five slide the FTSE 350 shares
The latest cause of the market crisis comes from California and New York, where two mid-sized US banks failed. Both banks specialized in clients in the US technology sector – and both failed due to poor risk management.
As the old saying goes, “When New York sneezes, London catches a cold”, the American contagion is quickly spreading to hit UK stocks hard. For example, each of these five FTSE 350 stocks have beaten the past few days:
| Company | Market value | stock price | Change a year | Change five years |
| Aviva | £12.0bn | 428.5 p | -22.0% | -37.1% |
| Barclays | £23.4bn | 148.18 pp | -12.8% | -27.0% |
| Direct Line | £2.1bn | 157.3 p | -42.6% | -58.8% |
| Legal & General | £14.4bn | 242.89 p | -8.3% | -6.4% |
| Lloyds | £31.7bn | 47.7 p | 0.0% | -28.3% |
The worst hit of these five shaken stocks Direct Line Insurance Group, which had the misfortune to publish the full year’s results to the market plunging there. Worse, its stock has lost more than two-fifths of its value in the past 12 months. Ouch.
Note that all five stocks occupy the financial sector: AvivaDirect Line and Legal & General Group it’s all insurance and asset managers, while Barclays and Lloyds Banking Group the leading UK bank. Each has been defeated by fear, uncertainty and doubt in the US banking sector.
I see this as a very cheap stock today
My wife bought all five of these stocks for our family portfolio in June or July last year. At the time, I saw each as a cheap buy – but some of those stocks are even cheaper now. Here’s how the value base stacks up now:
| Company | P/E ratio | Earnings yield | Dividend yield | Close the dividend |
| Aviva* | – | – | 7.2% | – |
| Barclays | 5.0 | 20.1% | 4.9% | 4.1 |
| Direct Line* | – | – | – | – |
| Legal & General | 6.7 | 15.0% | 8.0% | 1.9 |
| Lloyds | 6.6 | 15.1% | 5.0% | 3.0 |
As a veteran value/dividend/income investor, I’m drawn to stocks trading at low price-to-earnings ratios and, therefore, high yields. Barclays, L&G and Lloyds are all here, with Barclays looking like an outstanding bargain.
Also, I like to own cheap stocks that pay decent cash dividends while I wait for the stock price to rise. Four of the five discount stocks meet this requirement, while Direct Line has suspended its dividend until it returns later this year.
What’s more, the dividend cover of these stocks ranged from 1.9 times at L&G to 4.1 times at Barclays. Then again, these are all trailing (historical) figures – and analysts expect the financial company’s earnings to decline in 2023.
In summary, I’d love to buy all five of these cheap stocks today, but I won’t. That’s because I already have it, and I’m waiting for the new tax year to start on April 6th before investing more!
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