While the FTSE 100 is up this year, there has been plenty of carnage under the surface. As a result of the recent stock market volatility, plenty of Footsie stocks are down 10%, or more, year to date.
But big share price falls like this can create opportunities for investors with a long-term view. With that in mind, here are two beaten-up FTSE 100 stocks I’d buy today.
Long-term growth potential
One stock that strikes me as a buy right now is Britain’s biggest sportswear retailer JD Sports Fashion (LSE: JD). Only a few months ago, its share price was above 230p. Today however, the stock is trading below 190p.
While JD is dealing with the supply chain issues that are rife across the retail industry, I’m confident the long-term growth story here is intact. In my view, the retailer, which sells products from Nike, Adidas, and Puma, is well-placed to benefit from the continuing casualisation of fashion – which is a huge trend globally. It also looks poised to benefit from the increasing focus on health and wellness. It’s worth noting that for the year ended 31 January, analysts expect revenue growth of 37%.
One risk to consider here is that companies such as Nike and Adidas are ramping up their e-commerce operations and increasingly selling direct to consumers. This could potentially provide challenges for JD in the future.
I think this risk is priced into the stock however. Currently, JD Sports Fashion shares trade at just 16 times forecast earnings. That strikes me as a low valuation, given the growth the company is generating right now.
Down 15% in a month
Another beaten-up FTSE 100 I’d snap up today is cloud-based accounting solutions provider Sage (LSE:SGE). Its share price has taken quite a hit this year, falling from near 850p to around 720p. Given that I thought the stock was worth buying for my portfolio at the 850p level, I think it’s definitely worth buying near the 720p mark.
There are two main reasons I’m bullish on Sage. One is that I expect the company to benefit from the global economic recovery. The recovery should lead to higher spending from small- and mid-sized businesses – Sage’s target market. Another is that the company looks well-placed to benefit from the digital transformation trend. Sage’s cloud-based solutions can help businesses digitise their processes and become far more efficient.
After the recent share price fall here, Sage now trades on a P/E ratio of about 28. For a software-as-a-service (SaaS) company with a high proportion of recurring revenues, I think that’s a very attractive valuation. It’s worth noting that US rival Intuit has a much higher valuation.
This FTSE 100 stock is not without risk, of course. It could underperform if technology stocks continue to be pummeled. Overall however, I think the long-term risk/reward proposition here is very attractive after the recent pullback.
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Edward Sheldon owns shares in Sage Group and Intuit. The Motley Fool UK has recommended Nike and Sage 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.
