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These FTSE 100 shares look too cheap to miss following recent share price falls. Here’s why I’d buy both of them for my UK shares portfolio if I had the cash to spare.
Rio Tinto
Signs of economic strain are always bad for commodities markets. However, the outlook is bleaker than usual right now given the heightened struggle that China in particular is experiencing.
This has pulled the share prices of mining stocks like Rio Tinto (LSE:RIO) sharply lower. China sucks up around 70% of the world’s seaborne iron ore, for instance, a material of which this particular firm is a major producer.
Rio’s share price has fallen 14% since the start of 2023 as fears have grown. However, it’s a decline that’s making me consider increasing my stake in the business.
Today the mining giant trades on a forward price-to-earnings (P/E) ratio of 8.6 times. It also sports a gigantic 7% dividend yield, well ahead of the FTSE 100 average of 3.8%.
I believe that its share price will rebound strongly from current levels. Commodities demand is tipped to rocket over the next decade thanks to a raft of factors including:
- Growing demand for green technologies (like electric cars and solar panels)
- Major infrastructure upgrades in the West
- Continued urbanisation in emerging markets
- Rising sales of consumer electronics
- Moves to improve supply chains following Covid-19
Major miners like this are attractive ways to capitalise on the coming supercycle, too. They have the financial clout to expand their operations through acquisitions and project upgrades.
Indeed, Rio Tinto’s net-debt-to-EBITDA ratio stood at below 0.4 times as of June. This gives it plenty of scope to continue investing heavily for future profits growth.
JD Sports Fashion
Retail stocks like JD Sports (LSE:JD.) are falling again as British consumers continue tightening their belts. Latest retail figures from the Office for National Statistics were especially grim for this FTSE share: they showed non-food sales volumes slumping an alarming 1.9% in September.
As if this wasn’t enough, the sportswear giant also faces near-term uncertainty as European economies toil. The firm sources almost 60% of group revenues from the UK, Ireland and mainland Europe.
This explains why the retailer trades on a lowly forward P/E multiple of 9.6 times. But as with Rio Tinto, I believe recent share price weakness represents an attractive dip-buying opportunity for patient investors like me.
It’s my opinion that the cheapness of JD’s shares doesn’t reflect its robust long-term outlook. The athleisure market continues to grow strongly.
Mordor Intelligence analysts expect the global athleisure sector to grow at an annualised rate of 6.09% to 2028. And JD continues expanding rapidly to exploit this opportunity. It added another 53 stores to its premium brand portfolio between February and July, taking the total to 1,975.
I also like JD because of its focus on premium brands like Nike, Adidas and Puma. Not only does this give it some of the highest margins in the industry (gross margins stood at 48% in the first half). Its ability to stock the hottest sportswear labels — some of whose products it sells exclusively — also goes a long way to boosting its own brand power. This is a winning combination.
