The FTSE 100 smashed by means of 8,000 factors in April, and hasn’t regarded again since. And its climb since 2020 is already making that 12 months’s inventory market crash fade into historical past.

However I believe shares within the well-known London Footsie nonetheless look filth low-cost, and I wish to let you know why.

Low index valuation

In comparison with different main inventory market indexes, the FTSE 100 is on a considerably decrease price-to-earnings (P/E) ratio.

The quoted values rely upon who we ask, nevertheless it’s round 12 proper now, based mostly on forecast earnings. That’s low in comparison with a long-term common of round 15.

And, it’s additionally lower than half the US S&P 500 P/E, which stands at 28. Curiously, that’s a bit above the the Nasdaq‘s ratio of 26. With the tech stock index home to some high-flyers, it might still be cheap even though it’s up at document ranges.

Now, the FTSE 100’s low valuation at this time could be justified, contemplating the UK’s excessive rates of interest and bond yieds. These make different investments look extra engaging. However that may solely be quick time period, certainly.

Buybacks and takeovers

If I take a look at the inventory market information on simply at some point, I see 13 corporations within the FTSE 100 shopping for again their very own shares. And there are near 30 corporations doing it on completely different days in the mean time.

It contains Barclays (LSE: BARC), which is returning a giant chunk of money to shareholders.

With Q1 outcomes, the financial institution introduced a “plan to return a minimum of £10bn of capital to shareholders between 2024 and 2026, by means of dividends and share buybacks, with a continued choice for buybacks“.

That £10bn is sort of a 3rd of the Barclays market cap!

It certain makes me assume Barclays charges its personal shares as low-cost.

The odor of takeovers is within the air too, and we almost noticed Anglo American purchased out by fellow miner BHP Group in Might. The bid valued Anglo at £34bn, forward of at this time’s £29bn, however the board rejected it.

Low-cost particular person shares

If we predict the FTSE 100 is undervalued, we may purchase an index tracker. I favor to decide on my particular person shares, although, as too many simply look too low-cost to me.

I’ve talked about Barclays, so I’ll look nearer at that for instance of why I believe the UK’s high shares are good worth.

The Barclays share price has accomplished effectively this 12 months. However we nonetheless see a P/E of solely seven based mostly on forecasts. And it could drop loads additional by 2026, as little as 4.6, if the analysts have it proper.

There’s no actual shock that brokers have a reasonably sturdy purchase consensus out for Barclays proper now.

The financial institution does face dangers, and I believe it’s prone to see margins squeezed when the inevitable rate of interest cuts occur. So we would see share price weak point till the UK settles to new long-term charges. I count on volatility, a minimum of.

However I do assume Barclays is a shining instance of why I see FTSE 100 shares as low-cost.