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No-one likes to see their share portfolios plummet in value. This has been the case in recent days, as concerns of an AI bubble have sunk stock markets.
Yet, tough times like this shouldn’t lead to panic. History shows us that share prices always recover strongly from periods of volatility.
In fact, as an investor myself, I welcome choppy stock market conditions. It enables me to nip in and grab some bargains, boosting my long-term returns as prices recover.
I think two FTSE 100 shares in particular deserve serious attention today. Aviva (LSE:AV.) and Diageo (LSE:DGE) both look dirt cheap after recent price drops.
Here’s why they’re worth consideration from savvy investors.
All-round value
Aviva is the third-biggest faller on the Footsie over the past week, down 8%. Poor economic data from the UK hasn’t helped its share price in November, impacting the sales outlook for the firm’s discretionary financial products.
Yet, I’m convinced the longer-term outlook for Aviva remains compelling. The firm offers a wide range of retirement, wealth, and insurance services. This gives it a multitude of ways to supercharge profits as populations get older and financial planning grows in importance.
Its significant cash reserves also provide room for more growth-boosting acquisitions like Direct Line. It has a Solvency II capital ratio of 177% today. Analysts at RBC Capital expect this to rise still higher by 2028, to 202%.
Aviva’s share price decline has pushed its forward dividend yield back above 6%, to 6.1%. It’s also pulled its corresponding price-to-earnings (P/E) ratio further below the FTSE 100 average of 12.3 times.
On top of this, the company’s trading on a forward price-to-earnings-to-growth (PEG) ratio of 0.1. Any sub-1 reading suggests excellent value.
Dave rides in
Diageo’s been one of the FTSE’s worst performing shares in recent years. It’s been up and down in November, but slumped 7% in the last seven days, putting it in the red for the month to date.
Investors remain nervy about alcohol demand in the current consumer climate. And with good reason — Diageo’s net sales dropped 2.2% in the September quarter, latest financials showed.
Yet the long-term picture here remains robust, in my opinion, despite the threat from weight-loss jabs like Ozempic. The broader alcoholic drinks market should grow strongly, driven by booming emerging markets where use of anti-obesity drugs is low. Diageo’s powerhouse labels like Guinness and Johnnie Walker give it the edge in this growing market, too.
I’m also encouraged by the appointment of Sir Dave Lewis as the company’s new chief executive. I think the architect of past recoveries at Tesco and Unilever is the man to rejuvenate sales and drive efficiencies across the business. This is likely to include the expunging of underperforming labels pulling the broader group lower.
Diageo’s fresh share price drop leaves it trading on a forward P/E ratio of 13.1 times. That’s miles off the 10-year average of 21 times, and in my view makes the firm worth close attention from patient investors.
