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Top 2 FTSE 100 Value Stocks to Buy This September

7 September 2024
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The month of September has always been traditionally tumultuous. When the school bells ring again and a crispness enters the air, infusing our daily lives with a sense of promise and new beginnings. As we transition from the leisure of summer to the industriousness of fall, it’s perhaps an opportune moment to consider rejuvenating our investment portfolios. For those looking towards the venerable FTSE 100 index for value stocks, we have identified two standout picks you might want to consider this month.

Warren Buffett says the best dividend shares are ones that can also reinvest their earnings at good rates. Which FTSE 100 stocks have this ability?

1. Lloyds Banking Group (LLOY)

Why Lloyds Caught Our Eye

As one of the UK’s oldest and most significant financial institutions, Lloyds Banking Group has long been a stalwart of the FTSE 100. The share price of Lloyds, however, has been somewhat underwhelming of late, making it a classic undervalued gem in the otherwise highly prized index.

Resilience Amidst Economic Turbulence

Given the wider macroeconomic conditions, from fluctuating interest rates to the lingering impact of Brexit, Lloyds has demonstrated remarkable resilience. It’s essential to consider the broader context:

  • Focus on UK Market: Unlike some of its counterparts, Lloyds primarily focuses on the UK market, which could reduce exposure to wild international economic swings.
  • Customer Centricity: Lloyds has been making strides in digital transformation and online banking, enhancing customer satisfaction and operational efficiency.
  • Consistent Dividend: Its history of consistent dividends is a comfort for value investors, particularly those seeking income stability.

2. Tesco (TSCO)

Why Tesco is Worth Another Look

The UK’s largest grocery retailer has encountered its share of challenges over the years. Yet Tesco’s sheer scale and dominance in the market offer a compelling value proposition that’s hard to ignore.

Adapting to Consumer Behaviour

Tesco has shown an adeptness for understanding and adapting to shifting consumer behaviours, arguably better than many of its competitors:

  • Online Expansion: Amid a rapid shift towards online shopping, Tesco has significantly expanded its e-commerce footprint, becoming one of the leaders in the UK’s online grocery market.
  • Loyalty Programs: Its Clubcard program is highly regarded, driving customer loyalty and providing rich consumer data that helps inform strategic decisions.
  • Sustainability: Tesco has committed itself to ambitious sustainability goals, which could bolster its reputation and market share in the long term.

Financial Prudence and Market Position

Moreover, Tesco has exhibited admirable financial prudence. The company’s ability to maintain a solid balance sheet and its dominant position in the market makes it an attractive value stock:

  • Profit Margins: Despite price wars with competitors, Tesco has managed to maintain decent profit margins thanks to its vast supply chain efficiencies.
  • Store Footprint: With an extensive network of stores, Tesco boasts significant market reach, enhancing both brand visibility and accessibility.
  • Healthy Dividend: A robust dividend policy provides a steady stream of income, making it appealing for dividend investors.

In the ever-fluctuating realm of stock markets, it often pays to cast a discerning eye over the value stocks that may be overlooked by the broader market sentiment. Both Lloyds Banking Group and Tesco represent compelling opportunities within the FTSE 100 for value-seeking investors. Their inherent resilience, historical performance, and strategic initiatives position them well for the months ahead.

As September unfolds and the leaves begin to turn, perhaps it’s time for your portfolio to experience a similar transformation. Embrace these value stocks and let them add a golden hue to your investment strategy, setting a positive tone for the remainder of the year.

Buffett’s had great success investing in dividend stocks that he can reinvest, retained earnings at good rates. And I think both Tescos and Lloyds have this ability.

Past success doesn’t guarantee a good result in future. But I think both companies have durable competitive advantages, giving them a decent chance going forward.

This is not a financial advice. Refer to your Financial advisor before making any decisions.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.