But it isn’t all gloomy skies. The Office of National Statistics found that the UK economy grew by 0.2% in the second quarter of 2022, dispelling fears of a recession. 

I think quality FTSE 100 shares are still the best option for my growth portfolio. Looking at the charts, top UK shares have been rather elastic, rising strongly after recent crashes. While there is no guarantee that this will happen again, investing during mini crashes has historically been a great way to buy/add growth stocks. This is why I think it is the perfect time to invest in two FTSE 100 shares from my watchlist. 

Pandemic superstars 

Croda International (LSE:CRDA) and Ashtead Group (LSE:AHT) are two companies that I have been tracking closely since the pandemic. Between March 2020 and November 2021, these two FTSE 100 shares went up 152% and 342% respectively.

But since then, market corrections have put these top performers in bargain territory.

Industrial equipment rental firm Ashtead is down 34% since its all-time high and is currently trading at 4,000p, at a price-to-earnings (P/E) ratio of 14.6 times.

Across the financial year (FY) 2022, a period when most businesses struggled with inflation, Ashtead’s revenue jumped nearly 20% to £7.96bn, while net income grew of 36% to £1.25bn. In fact, Ashtead’s revenue has increased every year since 2018.

The company has a strong presence in the US, UK, and Canada, trading under the name Sunbelt Rentals. Its industry was recently boosted by US President Joe Biden’s public works stimulus bill. As a result, rental revenue from the US jumped 29% in the first quarter of FY2023. 

Similarly, chemical giant Croda has fallen 38% since its all-time high in November 2021. It is currently trading at 6,370p at a P/E ratio of 12.5 times. 

In FY2021 (ended 31 December 2021), Croda’s revenue jumped 35.9% to £1.89bn with net income growth of 59% to £320.8m. The company has also seen significant growth across the first half (H1) of 2022. Sales rose 21% compared to the same period in 2021. 

The British manufacturer is currently transitioning into a life sciences business, with a focus on cosmetics and pharmaceuticals. The board expects this to streamline the business with stronger margins and higher returns. 

Concerns and verdict

Both businesses have a global presence and the falling pound could affect profits moving forward. Given the volatility in global markets, this could cause these FTSE 100 shares to fall further. 

Also, a recession in the US could halt development projects, causing Ashtead’s sales to drop. Croda is still seeing proceeds from its Covid test kit chemicals, which is expected to slow down completely moving forward.

Despite these concerns, I think both businesses are well placed to navigate choppy waters. These businesses have demonstrated significant growth in recent times and have established strong markets and steady sales. Given the balance sheets, these FTSE 100 shares look dirt-cheap to me at current levels.

The post 2 beaten-down FTSE 100 shares I’d buy before the market recovers appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Croda International. 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.

The alternative of holding individual company shares is far less appealing, and there is not a single one on the London stock market that I would buy and hold until retirement without the option to sell along the way. Not even those in the FTSE 100 with high dividend yields like today’s out-of-favour defensive firms,. That includes utility provider SSE, cigarette producer Imperial Brands and pharmaceutical giant GlaxoSmithKline, or troubled companies, such as British Gas owner Centrica, telecoms operator BT Group and struggling retailer Marks & Spencer Group. I also wouldn’t go for large cyclical firms, such as oil leviathans BP and Royal Dutch Shell, insurance company Legal & General Group, big miner Rio Tinto and banking firm HSBC Holdings.

Risky buys?

Picking one of those high-yielding firms to hold for 20 years is risky. For example, firms with defensive characteristics cycle in and out of favour. Their valuations can be driven high and they can cycle down, as they seem to be doing now. Suddenly, that 20-year holding period doesn’t look so clever, especially if share prices and valuations are low at the point of retirement.

You could buy a troubled firm with a high yield. But we can never be sure a recovery in operations will take place. Sometimes companies get into even more trouble and cut their dividends, which sends their share prices plummeting. They can stay down for a long time or even go bust, as we’ve seen with Carillion.

Meanwhile, cyclicals with strong profits and high dividend yields can be an accident waiting to happen. What goes up often comes down and that includes earnings, dividend yields and share prices. You could end up with a cyclical low when you are ready to retire. Sometimes cyclicals fall so hard on a down-leg that they never recover to old highs. We could be seeing that effect with large banks such as Royal Bank of Scotland Group and Lloyds Banking Group.

Spreading risk and tapping the upside

Stocks switch categories too. I used to think the big supermarkets were stable, investable defensive firms. But now I’d put the likes of Tesco, WM Morrison Supermarkets and J Sainsbury into the ‘troubled firms’ category because of the threat to their sector from up and coming big-discounting competition.

However, by investing in a collective FTSE 100 tracking fund you can spread the risk. A peak in one category could balance a trough in another. The index is self-cleaning too. Badly performing firms tend to shrink and drop out of the index and companies growing fast get promoted into the index. The presence of growing firms and recovering cyclicals tends to mean that troughs are swiftly reversed – buying the dips of the index has historically been a good idea. And the long-term trade over decades is a good one. After all, the FTSE 100 started at 1,000 in 1984, which compares to 7,000 or so today. It’s the only investment I’d buy and hold until retirement.

The post Why the FTSE 100 is the only investment I’d buy and hold until retirement appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended BP, HSBC Holdings, Imperial Brands, Lloyds Banking Group, Royal Dutch Shell B, and Tesco. 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.

Investment opportunity?

Of course, whenever there is a fall in share prices it can present a buying opportunity. The aim for all investors is to buy shares when they’re low and sell when they’re much higher. However, for any stock to trade at a low level, there must be a reason. Without risks or negative news flow, all stocks would be likely to trade at high levels all of the time.

The current scenario facing the stock market is an uncertain future in a number of areas. Inflation continues to be a potential difficulty as the world economy moves from a decade-long deflationary period to one which could be characterised by faster price rises.

There are also concerns surrounding the response of policymakers to the threat of inflation, with interest rate rises having the potential to cool inflation. At the same time though, they could hurt economic growth prospects. And with progress seemingly being made on Brexit talks, a stronger pound could hurt the FTSE 100’s performance over the coming months.

Simple actions

While there are risks facing investors at the present time, the current situation is no different than any other period in that respect. Therefore, utilising investment principles which have been successful in the past could be a sound means of generating relatively strong returns over the long run.

For example, a number of large-caps now offer wide margins of safety. In the tobacco, utility and healthcare sectors there are high yields, low price-to-earnings (P/E) ratios and businesses with strong growth outlooks. They all face uncertain futures and come with various risks But buying them while they’re trading at a low ebb could lead to high returns.

Similarly, the banking sector could offer investment opportunities. With interest rates set to rise, the potential for improved profitability could be high. Yet many of the challenger banks and larger stocks in the sector offer low valuations. And while Brexit is contributing to a squeeze on consumer disposable incomes in real terms, retail stocks with sound balance sheets and innovative strategies could offer high, albeit volatile, returns in the long run.

Takeaway

At the present time, there doesn’t seem to be a ‘magic bullet’ which will ensure high returns for an investor. However, by focusing on valuations, financial strength, dividends and growth potential, it’s possible to generate high returns in the long run. The recent decline in share prices may continue over the course of the year. Therefore, buying opportunities could be plentiful for investors who are happy to take a long-term approach.

The post How to find the best stocks to buy in the Footsie right now appeared first on The Twelfth Magpie.

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• Is there any value left in Lloyds shares now they’re over £1?
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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Cost considerations

One area often overlooked by investors is the cost associated with buying and selling shares. Even though the internet has significantly reduced transaction costs, the reality is that with £1,000 to invest, a significant part of their profit is likely eaten up in charges.

For example, a competitive online broker is likely to charge up to £15 per transaction. When 0.5% stamp duty is added, it equates to a fall of 2% in the return on that £1,000 investment. With the cost of selling factored in, plus the spread between the bid and the offer price, an investor may need to generate a total return of 3.5%+ before they even break even. Given that shares generally return 7-8% per annum, that means up to six months of returns are paid out just in charges.

Therefore, it makes sense to try and keep costs to a minimum when investing relatively small amounts. One way of doing this is to adopt a buy-and-hold strategy, which means the volume of transactions is relatively low. Another way is to utilise aggregated orders. They’re available through most online brokers and while they reduce flexibility, they also cut buying costs by around 80%.

Tracker funds

Of course, someone who has £1,000 to invest in shares should still seek to diversify in order to reduce risk. One way is to buy a tracker fund. It aims to track the performance of the FTSE 100, or whatever index it is designed to follow. While its performance is unlikely to perfectly mirror that of the index due to tracking error, it should provide a result that is very close to the real thing. And with tracker funds generally having low charges, the total returns on offer could be significant.

Tracker funds also provide flexibility in terms of investing small amounts on a regular basis, which makes them ideal for smaller investors. And with the FTSE 100 yielding 3.9%, they could make a more rewarding, albeit riskier, alternative to savings accounts. With inflation being at around 3%, they could provide a means of obtaining a real income return over the medium term.

Certainly, buying shares in individual companies rather than purchasing a tracker fund can lead to the prospect of outperformance in the long run. It could mean that you’re able to generate double-digit returns per year. But for an investor starting out with £1,000, a tracker fund may provide a more cost-effective solution in accessing the growth potential which the Footsie has to offer.

The post How to invest in the Footsie if you have only £1,000 appeared first on The Twelfth Magpie.

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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

No, it isn’t! It’s a great day for long-term investors, and instead of shaking our heads and grinding our teeth, we should be reviewing our favourite shares to see which ones are looking even better buys today.

All that’s happened is a very silly thing that crops up with regularity. The FTSE 100 falls a couple of percent, the Dow Jones does the same a few hours later, and then the Asian markets catch on to the panic and there’s a sell-off there. And then, the next day, the Footsie carries on from where Asia left off and the slump continues.

People panic, wondering if this time it’s going to be the start of something big, and they sell out just in case. And we get a nonsensical circle which results in markets falling just because they’ve fallen. 

But it’s almost never the start of something big, and cooler-headed investors have a short-term opportunity to top up on their long-term favourites. And the markets quickly get back to business as usual — the FTSE 100 is already back to 7,220 points as I write, from an early low of 7,079.

Be greedy

Remember Warren Buffett’s famous exhortation to be “greedy when others are fearful“? I wonder how many times he’s looked at the headlines, shaken his head and thought “Why won’t they listen?” — while at the same time reaching for the Buy button.

What should you buy? I’d say the same thing you would have bought anyway, but you’ll get more of it for the same price. 

I’m looking at dividend favourite Aviva. With the shares at 495p now, I’m down 4.3% in just a couple of days myself. But you know what? If you buy at 495p, the predicted dividend would now give you a yield of 5.3% rather than the 5.1% you’d have snagged a couple of days ago. And with a forward P/E down to 9.3 (from 9.7), I’d say the growth prospects have just got a bit better too.

And look at BP shares. They’ve lost 5.7% during the rout, but does that make any sense? Has the outlook for the oil business suddenly deteriorated since Friday? I certainly don’t see it, but what I do see is a dividend yield that has been boosted to 6.1% by the share price fall.

There’ll surely be investors snapping up these and other top shares in each sector today with a long-term view, and I reckon that’s a pretty good approach to short-term jitters.

Footsie still cheap

The FTSE 100 had soared by around 35% over two years, with other world markets doing even better, so it’s perhaps not surprising that nervous investors were looking for signs of a so-called correction. But that’s looking at the short term, and the UK’s top index is actually up only 23% over the past 10 years, which is hardly an over-heated performance.

This week’s stock market dip has pushed the forecast dividend yield for the index to around 4.5%, which is way ahead of its decade-long average of around 3.4%. I reckon that’s another sign that the UK’s best shares are still undervalued, especially after this irrational sell-off.

The post Why the lowest Footsie level since 2016 means “Buy, buy, buy” appeared first on The Twelfth Magpie.

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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
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Alan Oscroft owns shares in Aviva. The Motley Fool UK has recommended BP. 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.

Wolseley said sales detonated 16.7% during February-April, to £4.27bn. While favourable exchange rates boosted the top line by £423m, the plumbing play still witnessed a strong uptick in like-for-like revenues. These rose 6.6%, speeding up from 3.2% in the prior six months.

As a result, Wolseley trading profit was £254m for the third quarter, up 9.5% year-on-year.

Chief executive John Martin noted that “revenue growth in the quarter was good with US residential and commercial markets [were] growing well and industrial markets improving.” Indeed, Wolseley’s Stateside division again proved the group’s strongest performer, and like-for-like sales here jumped 8.5% in the period.

The Nordics moved back into growth, Martin added, although sales in the UK were broadly flat.

And Martin announced that sales have continued rising, commenting that “since the end of the period revenue growth has been broadly in line with the third quarter,” while noting that “gross margins and cost control have been good.”

The company said it therefore expects full-year results to meet current market expectations.

Strong and stable

Wolseley has made no secret that it expects North America to drive profits growth in the years ahead. Indeed, the plumber is about to take the symbolic step of rebranding itself as Ferguson after its US division in the coming months.

This optimism comes as little surprise as construction activity in the world’s largest economy remains robust. While latest data from the Commerce Department showed construction spending fell 1.4% month-on-month in April, the sector remains pretty strong.

Not only was March’s spending figure revised up to show growth of 1.1%, but the Commercial Construction Index released last week came out at 76 for the second quarter, up from 74 for the prior three months and indicating an improving outlook.

The City certainly believes Wolseley is on course to keep generating solid earnings growth, with analysts predicting rises of 20% and 8% for the years to July 2017 and 2018 respectively.

And such projections make it blistering value, in my opinion. Although a forward P/E ratio of 16.5 times nudges above the value benchmark of 15 times or below, a sub-1 PEG reading of 0.8 really suggests that Wolseley is hugely cheap relative to its growth prospects.

Toast this growth titan

A stable North American economy also bodes well for the earnings outlook at Diageo (LSE: DGE). The territory is the drinks giant’s largest single marketplace and is responsible for 37% of total revenues, and the London firm is doubling down on product investment  and  marketing spend to maximise returns from this expanding territory.

Diageo’s recent upward stride (the company’s share price hit fresh record peaks above £24 per share just today) leaves it looking pretty expensive on paper, the company sporting a prospective P/E ratio of 22.8 times.

But I believe the prospect of sustained profits growth, boosted by the benefits brought by sterling’s trek lower, fully justifies a premium rating.

The City has chalked in earnings rises of 18% and 8% in the years to June 2017 and 2018 respectively, and with the firm investing vast sums into market-leading labels like Johnnie Walker whisky and Captain Morgan rum, I reckon healthy growth can be expected long into the future.

The post 2 Footsie growth stars to supercharge your stocks portfolio appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Diageo. 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.

The London-and-Melbourne-headquartered company recently touched two-and-a-half-year peaks just shy of £33 per share, taking its share price gain since the start of 2016 to 75%. Rio Tinto has lost some ground since then, however, and I believe further losses may be on the horizon.

Swamped in excess

Current valuations certainly leave room for a downward re-rating, in my opinion. Rio Tinto is expected to enjoy a 30% earnings bounce in 2017, resulting in a P/E ratio of 12.8 times.

This figure is by no means terrible, at least on paper. In fact the FTSE 100 forward average stands closer to 15 times. But I reckon this is still too expensive given the fragile long-term outlook for its key markets.

Iron ore prices have more than doubled during the course of 2016 and smashed through the $80 per tonne milestone just this week. Still, this jaw-dropping ascent is thought to be down to rampant speculative activity rather than improving supply/demand indicators, and the recent clampdown on these trading activities by Chinese authorities could send values sinking.

And on fundamental side, latest data from China’s ports showed cumulative stockpiles of 110m tonnes, the highest level for more than two years. Furthermore, the country’s decision to shutter hundreds of tonnes of steel capacity casts an extra question mark over future consumption.

At the same time global supply has steadily ramped up, as producers seek to capitalise on recent commodity price strength, threatening to keep the market swamped in excess material for some time yet.

Rio Tinto sources around two-thirds of group earnings from the iron ore sector. But oversupply in this market is not the company’s only problem as the prospect of further Federal Reserve rate hikes could provide the US dollar with further jet fuel and put prices of all commodities under the cosh.

I reckon there are plenty of factors that could drive Rio Tinto’s share price lower in the months ahead.

Make a withdrawal

I also believe the prospect of prolonged income troubles and the pains of ongoing restructuring makes Standard Chartered (LSE: STAN) a poor pick at present.

But these problems certainly aren’t baked into the share price, in my opinion. For 2017, City analysts expect earnings at Standard Chartered to explode 132%, resulting in a P/E ratio of 17.2 times. But I reckon this giddy forecast is in danger of a swingeing downward revision as the firm warned in November that “market conditions are expected to remain challenging.” The company saw revenues dive 6% between July and September, to $3.47bn.

Standard Chartered is ramping up its efforts to mitigate these perilous waters, and rumours surfaced last month that the firm will axe 10% of the workforce in its corporate and institutional banking divisions in the latest move to cut costs.

But the bank’s long-running transformation strategy is still failing to turn the ship back in the right direction, and the Bank of England’s latest round of stress tests showed that Standard Chartered still had “some capital inadequacies.”

With questions still raging over the extent of macroeconomic choppiness in the emerging markets of Asia in 2017 — and particularly as the Fed looks set to keep hiking interest rates — I reckon shrewd stock pickers should give Standard Chartered the cold shoulder.

The post Are these the FTSE 100’s most overvalued stocks? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Rio Tinto. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Industry data following June’s Brexit vote was far from comforting, with signs of flagging homebuyer demand creating huge concern over the profitability of the housing sector as we move into 2017.

But surveys more recently have underlined the cheery outlook for the likes of Taylor Wimpey — just this week Halifax noted that average house price growth registered at 6% in November, speeding up from the 5.2% year-on-year improvement in the prior month.

So although house price growth could slow in the coming months, Halifax advised that “very low mortgage rates and an ongoing, and acute, shortage of properties available for sale should help support price levels.”

With this homes shortfall set to persist long into the future, I reckon Taylor Wimpey certainly has plenty of scope for further share price gains, the firm providing terrific value for both growth and income investors.

Sure, the building behemoth is anticipated to endure a rare earnings fall in 2017 — a 4% decline is currently anticipated — but this results in a P/E ratio of just 8.9 times. Not only is this well below the FTSE 100 forward average of 15 times, but a sub-10 reading suggests the risks facing the housing market are more than priced-in at current levels.

And despite these predicted bottom-line pressures, Taylor Wimpey’s rosy long-term earnings picture and exceptional cash generation is predicted to propel the dividend to 13.8p per share in 2017 from an estimated 11.2p in the current period.

This yields a staggering 9%, taking out the British blue-chip average of 3.5% by some distance.

Bank in bother

Financial giant Royal Bank of Scotland (LSE: RBS) is another Footsie pick dealing at mouth-watering paper valuations, even in spite of recent share price advances — the bank has added 19% in value over the past month, taking it to levels not seen since late June.

But unlike in the case of Taylor Wimpey, I don’t buy into this renewed sense of optimism and expect a downturn in the UK economy to weigh on RBS’s already-weak revenues prospects.

The bank saw income edge 2% higher during January-September, to £8.9bn, and I believe the fruits of its long-running asset-shedding programme will put paid to any chance of heady top-line growth looking ahead, not to mention the fallout from the UK’s ongoing Brexit negotiations.

And this isn’t the only problem for RBS as the firm faces a rising PPI bill ahead of a touted 2019 claims deadline, not to mention questions over its weak capital ratio — recent Bank of England stress testing revealed a £2bn black hole on the bank’s balance sheet.

So I believe stock pickers should ignore the low P/E ratio of 13.1 times for 2017, particularly as current broker predictions for a 25% earnings rise are in danger of a colossal downgrade in the months to come.

The post Are these FTSE 100 fizzers about to crash back down to earth? appeared first on The Twelfth Magpie.

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Power play

Power generator provider Ashtead Group (LSE: AHT) was far and away the Footsie’s strongest performer in November.

After a weak start to the month, the stock surged back to clock an impressive 22% rise, Ashtead even touching fresh peaks of £15.60 in the process.

Ashtead has bounced higher thanks to the collapse of fellow plant hire play Hewden last month. The firm had been desperately seeking financial backers as the EU referendum had caused business to fall away, putting its balance sheet under huge stress.

The Manchester-based business called in the administrators last week, and Ashtead was quick to capitalise on Hewden’s demise. Its A-Plant division snapped up “the powered access and power generation fleet of Hewden, five ‘on-site’ depots which service major petrochemical customers, the Interlift lifting and materials handling business and the Hewden brand name.” Ashtead shelled out £29m for the assets.

While the failure of its rival will give Ashtead a larger chunk of the domestic market, the uncertainties created by the Brexit vote could see the business suffer similar top-line troubles as Hewden. Last month the ONS announced that UK construction activity contracted 1.1% during July-September, diving from the prior quarter’s 0.1% decline and representing the worst performance for four years.

Last month’s share price rise has seen Ashtead’s P/E rating rise to 15.4 times for the period to April 2017, nudging just above the wider Footsie average of 15 times.

And while Ashtead’s strong presence in the North American marketplace gives it some protection against any potential difficulties in its home markets, I reckon signs of increased domestic difficulty in the firm’s half-year report (scheduled for Tuesday, 6 December) could see Ashtead’s share price backtrack heavily.

Financial favourite

Insurance leviathan Prudential (LSE: PRU) also enjoyed a healthy share price bump during November, the stock adding 16% in value during the course of the month and reaching its highest since last December at one point.

Investors were encouraged to pile-in with gusto following Prudential’s latest bubbly market update. The financial giant advised that new business profit clocked in at £1.97bn from January-June, up from new business profit of £1.76bn during the same 2015 period.

Again Prudential had surging demand from Asia to thank for this breakneck momentum, a region where new business profits grew 23% year-on-year in the nine months. And I expect revenues from the continent to keep spiralling higher as rising personal affluence drives financial product demand, and The Pru continues its ambitious Asian expansion programme.

The City expects Prudential to return to earnings growth in 2017, the company predicted to endure a rare blip in the current period. And next year’s projection results in an ultra-low P/E rating of 11.9 times.

This is a bargain, in my opinion, given Prudential’s strong sales momentum and growing presence in hot growth markets. And I reckon this low rating leaves plenty of room for further share price strength.

The post These FTSE 100 shares exploded in November. Can they keep going? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The broadcasting giant has seen the value of its stock erode 36% since the year kicked off, the company even taking in three-year troughs in the days following June’s shock EU referendum result.

The evaporation in investor appetite can be considered wholly justified on one hand, reflecting a marked slowdown in advertising revenues at the company. Just this month ITV advised that ad sales fell 4% during the July to September quarter. Has trade improved since? No chance. The business also advised that “in recent weeks the political and economic uncertainty has increased and we are currently seeing more cautious behaviour by advertisers.”

And the TV firm suggested that there’s worse to come as Brexit dominates commercial decisions — as a result, ITV has pencilled-in a 7% earnings dip for the fourth quarter.

Of course waning advertiser revenues are a big problem for the broadcaster, but stock pickers shouldn’t overlook the robust performance of the rest of the business. ITV announced that revenues from its ITV Studios production arm soared 18% during Q3, to £923m, reflecting the media firm’s ambitious global expansion drive.

On top of this, ITV’s Online, Pay & Interactive division enjoyed a 22% revenues uptick during the last quarter, demonstrating the company’s know-how across media platforms.

So although ITV’s brilliant record of earnings generation is expected to come to a halt in 2016 — a 1% drop is anticipated by City analysts — I reckon a consequent P/E rating of 10.1 times is a supreme level at which to latch onto the firm’s stunning long-term growth prospects.

Meanwhile, a 4.4% dividend yield also suggests ITV is currently undervalued by the market.

The right medicine

There’s also an argument that recent heavy selling at GlaxoSmithKline (LSE: GSK) is somewhat unjustified given the pharma ace’s rapidly-improving sales outlook.

After reaching record peaks above £17.20 per share in October, GlaxoSmithKline has seen investor demand cool sharply during the last six weeks and the firm was most recently dealing at a hefty 12% discount to last month’s heights.

However, I’m convinced GlaxoSmithKline’s next charge higher is a matter of ‘when’ rather than ‘if’. Why? An anticipated 31% earnings rise in 2016 should herald an end to the value-crushing patent problems of yesteryear.

Indeed, the pills play’s rejuvenated product pipeline looks set to supercharge group revenues in the years ahead, particularly as GlaxoSmithKline pours huge investment into fast-growing areas like HIV and vaccines.

And the Brentford-based business certainly offers excellent value for money given its blockbuster investment potential. GlaxoSmithKline boasts a forward P/E ratio of 15.1 times, in line with the wider FTSE 100 average. But a 5.3% dividend yield takes the scythe to most of the Footsie competition.

The post 2 FTSE 100 stars you should consider buying before it’s too late appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended ITV. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.