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The FTSE 100’s risen by round 6% thus far this 12 months. That is thanks largely to bettering shopping for curiosity from worth traders.
Even together with these current features, the Footsie has lagged different main world share indices for a number of years now. It signifies that many high UK blue-chip shares can nonetheless be picked up at rock-bottom costs.
Nonetheless, some large-cap firms are low-cost for good cause. And traders should be cautious to keep away from these just like the plague.
Take the next FTSE 100 shares, for example. Are they sensible bargains or might they become investor traps?
Barclays
Proper now, Barclays (LSE:BARC) shares supply glorious all-round worth, at the very least on paper. The excessive avenue financial institution trades on a ahead price-to-earnings (P/E) ratio of 6.7 occasions. In the meantime, its dividend yield for this 12 months sits at a horny 4.1%.
Barclays’ US operations might present it with glorious alternatives to develop earnings. It additionally has a considerable funding financial institution.
Nonetheless, the enterprise can be depending on a powerful UK financial system to drive the underside line. In 2023, its home banking and bank card operations made up nearly 40% of group earnings. This can be a concern to me given the large structural issues which might be strangling British GDP development.
So I nonetheless have big reservations about shopping for its shares. However this isn’t my solely fear.
I’m additionally postpone by the rising aggressive pressures it’s going through internationally. Challenger financial institution Revolut introduced on Tuesday (2 July) that the variety of retail clients on its books soared 45% in 2023, to 38m.
Its capability to steal clients from established banks like Barclays will develop too if — as anticipated — Revolut secures a UK banking licence within the close to future. With a spate of IPOs being lined up by fintech companies, the banking panorama may very well be about to vary considerably.
WPP
In fact, no share funding is totally with out threat. However within the case of WPP (LSE:WPP), I imagine the potential rewards on supply outweigh the risks it poses to traders.
The promoting company has had its fair proportion of troubles extra not too long ago. Weak spending from the US tech sector — mixed with the influence of China’s slowdown — stays a risk.
So do basic modifications in the best way firms select to promote their items and providers. An increasing number of companies are bringing their advertising actions in-house. Some public relations specialists are additionally pulling their tanks onto WPP’s garden by providing promoting providers.
But I nonetheless imagine WPP has appreciable funding potential. Working in additional than 100 nations, it has vital scope to harness speedy financial development in rising markets. Rising funding in digital promoting and e-commerce additionally units it up properly for the digital revolution.
Lastly, WPP has experience in a number of areas together with promoting, public relations and model consulting. This makes it a trusted and evergreen provider for end-to-end providers with a few of the world’s greatest firms.
Like Barclays, WPP shares supply strong worth, on paper. They commerce on a ahead P/E ratio of 8 occasions and carry a 5.3% dividend yield. It’s a share I’ll think about shopping for if I’ve spare money to speculate this July.
