The FTSE 100 sits at a record high. But some stocks still look dirt cheap!

The FTSE 100 has been on relative fireplace in latest weeks, making April’s sell-off really feel like a distant reminiscence. Yesterday, it handed the 9,000 boundary for the primary time, leaving the index up 9% year-to-date and outpacing the S&P 500. It has dipped again slightly below 9,000 since although.

We will speculate on the explanations for this nice efficiency however the want of some buyers to diversify away from the US on fears surrounding the well being of its financial system is probably going excessive up the record.

Nonetheless, this advantageous run of kind belies the truth that some Footsie members are nonetheless buying and selling at filth low cost valuations.

Cut price value

Shares in pharmaceutical big GSK (LSE: GSK) at the moment change fingers at a price-to-earnings (P/E) ratio of rather less than 9. That’s low in comparison with the broader UK market. It’s additionally considerably down from the corporate’s common P/E during the last 5 years (15).

At the least a few of that is most likely on account of considerations over the Trump administration’s risk to slap tariffs on imported medicines. Well being secretary Robert F Kennedy can be a vocal critic of vaccines — GSK’s bread and butter.

Another excuse is its fairly woeful monitor report. If I’d put £10,000 to work within the inventory 5 years in the past, my stake would solely be value round £8,600 as we speak. Sure, dividends would have dulled the ache a bit. Nevertheless it’s nonetheless deeply unsatisfactory when different members of the index have delivered much better returns.

On a optimistic word…

There are, nonetheless, just a few issues to say in GSK’s favour, apart from a budget as chips price ticket.

Whereas the execution danger stays substantial, the corporate’s pipeline of recent therapies, and use of present merchandise in several markets, might usher in a brand new section of development. An utility to develop using its RSV (respiratory syncytial virus) vaccine Arexvy to adults aged 18-49, for instance, was lately submitted to the FDA.

Second, the forecast dividend yield of 4.6% is greater than the typical throughout the UK’s prime tier (3.3%). It needs to be simply coated by revenue too, assuming analysts aren’t huge of the mark of their calculations.

As simplistic because it sounds, it’s value remembering that Trump will ultimately vacate the White Home. Whereas we will’t predict the insurance policies of the subsequent US President with any certainty, I reckon there’s a great likelihood that s/he received’t be fairly as combative.

On prime of this, there’s little or no curiosity in GSK from brief sellers — these betting an organization’s share value has additional to fall. A spate of director shopping for in June bodes nicely too, even when a number of the quantities have been pretty modest.

Defensive choice

It’s fairly attainable that the optimistic momentum we’re seeing within the FTSE 100 may very well be about to sluggish and even reverse, particularly if any contemporary bulletins from Chancellor Rachel Reeves show unpopular with the Metropolis. Information that UK inflation climbed to three.6% in June might also give buyers pause for thought.

In such a state of affairs, extra defensive shares might have their time within the solar. And regardless of the aforementioned headwinds, there aren’t many sectors extra defensive than the one occupied by GSK.

All informed, I feel it’s value contemplating, particularly by these with a want to tilt their portfolios in the direction of worth and revenue.