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Date : March 2, 2024
Bull vs bear

Is it too late to buy cheap FTSE 100 shares in 2022?

Bronze bull and bear figurines

The FTSE 100 is back above 7,500 at time of writing, and I’m delighted. That’s because I went on a buying spree when it dipped below 7,000 last month, and my new purchases are up between 8% and 12% in a matter of weeks.

Now I’m asking myself one question. With the index of top UK blue-chips jumping 6% in a month, has the buying opportunity passed for this year?

FTSE 100 shares are on the up

The first thing I should say is that trying to time the market is a mug’s game. Nobody has any idea where the FTSE 100 will go next. However, there’s one way I can make market movements work in my favour.

I do that by purchasing shares after a dip has actually happened. That way, there’s no second guessing required. The facts are in. Shares are cheaper and if I choose carefully I can pick up some bargains.

With that thought in mind, when the FTSE 100 slipped to a recent low of around 6,800 I went shopping for companies with low valuations, high yields and positive prospects measured over 10 to 15 years.

I started with housebuilder Persimmon even though I suspected its 20% yield was not built to last (it wasn’t). Despite concerns over a house price crash, its stock is already up 12% since I bought it, helped by my low entry price.

I also bought miner Rio Tinto, which had the FTSE 100’s second biggest yield of 14% at the time (and this one hasn’t been cut). It has since jumped 8%. My third stock pick was Rolls-Royce. No dividend, here, but it was dirt cheap with, I believe, huge recovery prospects. It’s up 10% so far.

All of which is very nice, but I’m not taking my early success as proof of anything really. Over the short term, share prices can go anywhere. As I said, my focus is the long term. Yet bagging a stock at a low valuation gives me a cushion against further volatility. It should also magnify my returns when things go well.

These top stocks are still cheap

The FTSE 100 is still packed with cheap stocks, but they’re not quite as cheap as before. On Thursday, I bought Lloyds Banking Group. It also looks good value, trading at 6.15 times earnings and yielding 4.29%. Yet it’s up 12% in a month, so I missed that bounce.

Insurer Legal & General Group is riding high on my watchlist and still looks cheap trading at 7.47 times earnings and yielding 7.24%. Yet it’s up 10% in a month.

On reflection, I’ve been spoiled by my recent short-term success. As Lloyds and L&G show, the FTSE 100 is still packed with bargain stocks at dirt-cheap valuations.

If markets are boosted by the seasonal Santa Rally, these stocks could soon cost more rather than less and I could have missed out for a second time. At today’s prices, it would be rude (and silly) not to buy good companies just because they were cheaper a month ago. Investing is about looking forwards, not backwards.

The post Is it too late to buy cheap FTSE 100 shares in 2022? appeared first on The Motley Fool UK.

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Harvey Jones holds shares in Lloyds Banking Group, Persimmon, Rio Tinto and Rolls-Royce. The Motley Fool UK has recommended Lloyds Banking Group. 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.

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