After a bumpy week, I can see loads of great value stocks on the UK market. A string of FTSE 100 companies look cheap after recent volatility and offer long-term recovery potential.
We now head into another twitchy spell as investors fret about the artificial intelligence bubble, while Wednesday (26 November) brings the Budget. I’ve picked out three FTSE 100 names that could swing sharply depending on what the Chancellor announces.
Lloyds Banking Group (LSE: LLOY) has enjoyed an impressive run. Its shares have risen 60% over the last year and 145% over five, with dividends on top.
It’s still making plenty of money, with full-year 2024 profits of £4.5bn. That was lower than 2023’s £5.5bn, but the drop was driven by one-off costs such as the £700m motor finance mis-selling provision. Management softened the blow with a £1.7bn share buyback, taking total capital returns for the year to £3.6bn including dividends.
In the Budget, Rachel Reeves could hit banks with a windfall tax, potentially increasing the surcharge on profits from 3% to 8%. The shares could move quickly in either direction depending on what she does. With a modest price-to-earnings ratio of about 13.9, I still feel Lloyds is worth considering for long-term investors, although they may prefer to wait and see what the Budget brings. It’s only three days away now.
Budget carrier easyJet (LSE: EZJ) has struggled to recover from the pandemic, with its shares down 9.5% over the last year and 25% over five. It focuses on the European market, where consumers are still under the cosh, although bookings have held up pretty well and its new holidays division is performing strongly.
From April next year, it will be hit by an increase in air passenger duty, which is due to rise by 15% on most fares. The industry has been calling for Reeves to repeal that, although it seems unlikely to me. We just don’t know what she’ll do yet.
The current P/E is 7.5, so easyJet looks great value, but then it has done for several years without taking off. Investors may consider buying, but only if they’re planning to hold for the long haul to give it time to recover.
With a P/E of 23, I’m probably stretching things to call gambling and gaming giant Entain (LSE: ENT) a value stock, yet I still think it has plenty of scope for a re-rating. Its shares are down about 3% over the last year and 45% over three, despite a huge opportunity in the US, where trading has been strong.
There’s been repeated talk of Reeves hiking taxes on so-called ‘sin stocks’, and if she does, Entain could take a hit. Although with the US making up a bigger part of its operations thanks to its joint venture BetMGM with MGM Resorts International, which is booming right now, it may not be too big a blow. We’ll see on Wednesday.