Recently, the FTSE 100 index touched almost 7,400. And it has hovered close to these levels in recent days as well. While it pleases me enormously to see the rising value of my investments along with this trend, it also creates a challenge. As I now sit to plan my stock market investments for 2022, bargain buys are harder to find. This is a sharp contrast from last year, when the best of stocks were still available at pretty much throw-away prices.
Which is why, when I do spot a FTSE 100 stock trading at ridiculously low prices, it is almost always a no-brainer bargain buy for me for 2022. And here, I will not talk of not just one, but two stocks that could make great buys now for my portfolio. Before I go to the stocks in question, let me first clarify how I define bargain buys here.
What makes a FTSE 100 bargain buy
There are many ways to consider what makes a stock cheap. One of them is the actual price level. We at the Motley Fool write a lot about penny stocks, for instance, because they can in fact be good value for money at times. Another way is to look at the company’s price-to-earnings (P/E) ratio and compare it to the average FTSE 100 ratio. This is my quick and easy go-to method for getting a sense of whether the stock is undervalued or not.
A third one is relevant to the current context. The stock market crash disrupted share prices for FTSE 100 stocks across the board last year. Some stocks swiftly got past that drop and returned to pre-pandemic price levels. Others saw a return after the stock market rally that started last November when the vaccines were developed. However, there are yet others, that despite all their merits have still not managed to get back to pre-pandemic levels. And these according to me, are some of the best bargain buys around today.
BP is promising on oil demand
One of them is the oil biggie BP, which is still trading some 36% below its highs of early January 2020. It is in an encouraging place, though. It has gained 38% over the past year already. The outlook for oil is positive over the next couple of years or so, as the recovery gets underway and especially as travel takes off in a big way. It also has a decent 4.4% dividend yield. However, its latest results disappointed, as it clocked a loss. But I reckon this was a one-off event on technical reasons. I am still positive on BP.
HSBC could rise with the economy
Another bargain buy for me is the FTSE 100 banking corporation HSBC, which is still trading 25% below its pre-pandemic highs. Much like BP, however, there is hope here too. The bank has gained in the past year, rising by some 17%. Also, I think 2022 could be a great year for it, as growth makes a come back that increases lending activity for banks. Its China focus, of course, makes it vulnerable to any future Evergrande-style threats to the system, but I still like the stock. It is on my list of stocks to buy next.
Manika Premsingh owns shares of BP. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
This post was originally published on Motley Fool
