Value hunting after the stock market correction! 3 huge opportunities

The stock market correction took many investors by surprise in March. Financial stocks were worst hit as concerns spread from US banking stocks. At FTSE 100 now down 5% over one month, and flat over the year.

I always look for value – stocks trade at a discount rather than intrinsic or book value. However, even before the correction, I reckon that many UK-based financial stocks have been trading at a discount.

So, with the stock price falling in the last few weeks, I bought more of the top options. Here are three great opportunities.

Barclays

Barclays (LSE:BARC) is down around 20% in a month, amid concerns over unrealized bond losses and a domino effect across the financial sector. However, Barclays is very different from the collapsed Silicon Valley Bank.

UK institutions have a wider range of deposits and bond holdings than SVB. Liquidity is solid and it is worth noting that the majority of bonds will be held to maturity – even if their value has fallen during this cycle of monetary tightening.

Very high interest rates are not good for banks, because good loans become bad and lending will slow down. However, we are now close to the BoE’s top rate, and we should see interest rates return to more optimal levels very soon – perhaps 2%-3%.

Barclays trades at a price-to-earnings ratio (P/E) of only 4.45, yields a dividend of 5.2% and Discounted Cash Flow calculations show that the bank could be undervalued by 75%.

Hargreaves Lansdowne

Hargreaves Lansdowne (LSE:HL) shares are down 8% on the month. In fact, these stock and stock market platforms have been on a downward trajectory for some time during the pandemic.

While transaction volumes have declined, some investors are also concerned about the long-term viability of the company’s fee-based revenue stream. One American friend has stopped charging fees altogether and now focuses on earning interest on customer deposits.

This could be the way forward, and it is worth noting that transaction fees only represent a small percentage of Hargreaves’ total revenue. Lowering fees – or dropping them altogether as we have done with the Junior ISA – can bring in more clients, increasing interest income on customer deposits.

The P/E has dropped to 15 – not too expensive for a tech stock – and the dividend yield is 5.15%.

Legal & General

Legal & General (LSE:LGEN) shares are down 10% for the month. This is despite the company announcing in early March that operating profit would rise 12% to £2.52bn in 2022, beating consensus expectations of £2.46bn.

Earnings per share also rose 12% to 38.33p. The only problem is that the investment arm has underperformed amid the volatility. And most importantly, during the past year, the company’s solvency II ratio also increased by 49% to 236%.

For me, the correction presents a good opportunity to buy solid, high-yielding stocks, which will benefit from the positive trend in bulk purchase annuity solutions.

Challenging bond market conditions pose risks, but I think the positives outweigh the risks. It is undervalued with a strong balance sheet and strong cash generation.

It trades at just six times its dividend yield of 8.4%.

Registration

I see a considerable opportunity for value investors at the moment. I have increased my position in all three stocks above.