Brexit uncertainty and the US-China trade war have weighed on the public markets recently. But a depressed market is a buying opportunity.
So today, we give you three of the most undervalued shares in the FTSE 100, each delivering a very healthy dividend, which could be timely and welcome additions to an ISA or a SIPP.
Using the traditional discounted cashflow model of valuation, tobacco giant, Imperial Brands is 49% undervalued at its current price. The share price has done nothing but fall for the past 12 months. The shareholders are so unimpressed by this that they’ve ousted the CEO over it.
The next share I want to talk about is house builder, Persimmon Homes. Persimmon was the worst struck by a scandal concerning management bonuses against a backdrop of decreasing quality of the houses they produce. The price has fallen drastically over the last 12 months, but, encouragingly, the dividend yield, now standing at 11% and well-covered presents a great buying opportunity for a SIPP or ISA. At current price, Persimmon Homes is 52.9% undervalued.
While it continues to deliver on its dividend even in this terribly depressed state, I can’t help feeling that BT has an advantage in the telecoms sector. It owns the vast majority of UK infrastructure and as yet has failed to turn this into an unfair advantage. But there are signs of a turnaround. A new boss and a new London HQ could be the beginning of a turnaround, but patience is still likely to be required on the part of investors.
However, I think the threat of Jeremy Corbyn has something to do with the current substantial discount on BT. In the event of a Corbyn-led government, it seems that many fund managers think BT will be high on Mr Corbyn’s hit list for nationalisation, a move that would most likely shortchange current investors.
Full Disclosure: Aaron Parker owns stock in Persimmon Homes, BT Group & Imperial Brands.