The FTSE 100 is proving to be a great place to find stocks to buy. The index is up 19% over the last year, as global investors have sought top stocks with depressed valuations. And according to one major global bank, the party might last for some time yet!
UBS has noted that UK shares continue to carry “reasonable” valuations. More specifically, it notes that London stock market companies trade on a forward price-to-earnings (P/E) ratio of 12.4 times. That’s below the long-term average of 12.8.
The result? UBS expects FTSE 100 shares to rise from 10,467 points to 11,000 by the end of 2026. The bank’s tipping a target of 11,300 by next June too, though it’s also suggested 12,300 could be reached if economic conditions are stronger and interest rate hikes less aggressive.
2 FTSE 100 bargains
It’s important to remember forecasts like this can change overnight. But let’s say the bank’s estimates are accurate. Which might be the best stocks to buy before a market rally?
Despite the FTSE 100’s strong gains, many top shares remain dirt cheap today. So it’s perhaps wise to assume these could remain the biggest risers if the broader index marches higher.
Tritax Big Box is one top share that could outperform. As a real estate investment trust (REIT), it could especially benefit from fewer interest rate hikes. The trust’s risen 8% over the last year, though still trades at a meaty 12% discount to its net asset value (NAV) per share.
Tritax lets out warehouses and logistics properties, and is increasing its exposure to data centres as well, boosting its growth prospects. Occupier demand could weaken if the economy worsens, but it’s still a top stock to consider at current prices.
I think Prudential is another undervalued blue-chip star to consider. It’s up 12% on a 12-month horizon, but still trades on a forward P/E ratio below the FTSE 100 average, at 11.3 times. ‘The Pru’ has surged thanks to an improving outlook in its key markets such as China and Hong Kong.
Can Prudential continue rising though? Not if economic growth splutters in its Asian territories. The good news is crucial indicators such as consumer spending are improving rapidly, which bodes well for financial service providers.
Will Lion Finance keep roaring?
Lion Finance (LSE:BGEO) has outperformed Tritax and Prudential shares, rising 61% over the past year. And given its cheapness, it’s another FTSE 100 star performer to consider.
The Bank of Georgia owner trades on a forward P/E ratio of 7.1 times. That makes it one of the FTSE 100’s cheapest banks (Lloyds, for instance, carries a P/E of 11.1). Meanwhile, its dividend yield for 2026 is a healthy 3.2%.
So what are the risks? Like any banking share, Lion’s profits could come under pressure if economic conditions worsen, impacting revenues and bad loans. But I’m backing it to keep rising over the long term as its emerging markets rapidly grow. Its share price has risen 687% over five years.
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Royston Wild owns shares in Prudential.
