Stock market crash: 2 FTSE 100 stocks I think are still cheap

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The March stock market crash was followed by a mighty rally. A lot FTSE 100 stocks have rebounded sharply and the index is now down just 15% this year.Certain FTSE shares now appear to me at fixed prices. But I think there are still good deals. Today, I want to look at two stocks that I evaluate as good deals are bought at current levels.

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Only a small Covid-19 success?

Insurance group Aviva (LSE: AV) plans to take a relatively small blow from the coronavirus pandemic. As of April 30, the company said its general insurance division is expecting only £ 160 million in additional claims following Covid-19.

My sums suggest that, based on last year’s accounts, the company could pay these claims while generating a small profit from its general insurance business. If the level of claims remained stable in May, I think the impact of this pandemic on the business could be quite limited.

This FTSE 100 action could yield 10%

Aviva has become a popular choice with income investors (including me) in recent years. Thanks to a strong generation of cash and a low valuation, this FTSE security offered a well-hedged return of around 7.5% at the end of 2019. The company’s solvency coverage rate of 206% – a measure of available cash – far exceeded regulatory requirements.

All of this made the company’s decision in April to suspend its dividend somewhat surprising. Many shareholders have suggested that the firm could have afforded the payment and have only suspended it to avoid negative headlines.

In my opinion, there may be some truth in this. Insurers were under pressure from the financial regulator to cancel the dividends. It seems that Aviva’s board of directors has decided to be cautious before returns to shareholders.

The board has promised to review the situation in the last quarter of 2020. Unless things get worse, I’m pretty sure Aviva will pay a dividend for 2020. If the payment is restored to the level expected in 2019, this FTSE 100 action could yield 10% next year. I suspect we will see a small reduction, but with Aviva shares trading at only five times the expected profit, I remain a buyer.

I still think this share of the FTSE 100 will double

In May, I said that I thought the ITV (LSE: ITV) the stock price could double during a market recovery. So far, this FTSE 100 title has only increased by about 20%. But I haven’t seen anything to change my opinion on this TV job.

My positive vision is based on the fact that ITV remains very profitable and generates a lot of money. While declining ad spending and the move to online viewing have resulted in lower profits in recent years, I think the business is adapting.

The steady growth in ITV Studios’ production activity has reduced the group’s dependence on television revenues. And its online services are growing rapidly.

In 2019, ITV announced an operating profit margin of 16% and a return on capital employed of nearly 24%. The two figures show that the group’s profitability is far above the FTSE average. Although 2020 is a difficult year, I think 2021 should be much better.

ITV stocks are now trading 10 times the earnings of 2020, dropping to a multiple of eight times the earnings of 2021. I would buy this FTSE 100 stock today.

Roland Head owns shares of Aviva and ITV. Motley Fool UK recommended ITV. The opinions expressed on the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that taking into account a diverse range of ideas makes us better investors.



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