Dividend yields have soared and earnings multiples have sunk across the London stock market in 2022. This means there’s now now an abundance of top-quality, dirt-cheap stocks for investors like me to buy.
Here are two I think could be too cheap to miss.
Taylor Wimpey
The Taylor Wimpey (LSE: TW) share price has fallen by more than a quarter in 2022. It’s a descent that reflects fears that rising interest rates will crush the housing market.
It’s a danger that stock investors need to take seriously. But I feel that the impact of rising rates has been overstated. After all, mortgage rates remain well below historical norms. It’s why average property prices continue to rise (in fact they jumped at their fastest pace since 2004 in June, according to Halifax).
Extreme market competition means that homebuyers can still get ultra-affordable mortgage products from lenders. Furthermore, first-time buyers can still claim financial support from the government to get on the ladder.
And on Monday the Bank of England scrapped a key mortgage affordability test that could boost demand still further.
Full disclosure: I actually own shares in Taylor Wimpey. I’m an investor who buys stocks based on what returns I can expect over the long term (say a decade or more).
And I believe this FTSE 100 share will generate blockbuster profits over this period. The UK’s housing stock remains woefully short and should remain so given weak housebuilding activity. And population growth is tipped to stay strong, driving demand higher and with it property values.
As a fan of value investing I think Taylor Wimpey is particularly attractive right now. In fact I’m thinking of adding more to my portfolio given current prices. The business trades on a forward price-to-earnings (P/E) ratio of 6.7 times. It carries a big 7.2% dividend yield as well.
Bank of Georgia Group
Banks in emerging markets like Bank of Georgia (LSE: BGEO) are far less popular with investors than household names like Lloyds and Barclays. But strong economic growth in these regions could potentially deliver better long-term returns to investors.
Take Georgia, for instance. The economy there grew an impressive 10.5% between January and June. And this is no temporary blip: the Eurasian country saw GDP soar during the decade leading up to the pandemic.
I particularly like Bank of Georgia as an emerging market banking stock. This is because industry regulations in the country have been significantly tightened in recent years. It’s why ratings agency Fitch has described Georgia’s banking sector as “stable and well-capitalised.”
Cyclical shares like banks could suffer in the short term as the global economy cools. But in my opinion, this risk to earnings is well baked into Bank of Georgia’s low rock-bottom valuation.
Today the stock trades on a forward P/E ratio of 3.2 times. And I feel this, combined with the bank’s enormous 9.1% dividend yield, makes it a top cheap stock for me to buy.
