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Despite concerns about the global economy and stubborn inflation, i FTSE 100 continues to make tracks in early 2025. In fact, the UK’s leading share index is now within reach of last May’s record high of over 8,400 points.
It’s been a solid few years for Footsie. However, the long period of underperformance means that many green chips are still trading at cheap prices.
Here are my two favorite FTSE 100 stocks today. Not only do they trade at rock-bottom price-to-earnings (P/E) ratios, they also manage huge market share gains.
| FTSE 100 shares | The P/E ratio | Return yield |
|---|---|---|
| HSBC (LSE:HSBA) | 7.7 times | 6.5% |
| Rio Tinto (LSE:RIO) | 8.5 times | 6.6% |
Let me explain why I think they are worth considering.
The top bank
Asia-focused HSBC has indicated that it will tolerate a slight decline in earnings in 2025. This partly reflects the continuing threat posed by China’s weak economy, and particularly its deteriorating infrastructure sector.
But encouragingly, the bank has so far been able to successfully navigate the difficult trading environment. In the third quarter of 2024, it beat consumer forecasts to post revenue and profit growth of 5% and 10% respectively.
I wouldn’t bet against HSBC beating this year’s full-year estimates, helped by continued efforts to accelerate cost-cutting. According to Bloomberg, the bank aims to save £3bn by restructuring efforts it aims to end in June.
I think HSBC shares could deliver huge long-term returns as demand for the financial product grows in its emerging markets. It has the scale and capacity of the brand to charge more for its revenue growth, and plans to split its operations between ‘East’ and ‘West’ should help meet its goals.
A big miner
Rio Tinto’s other Footsie share is expected to post a slight discount to earnings in 2025. This reflects problems in China’s resource-hungry economy, which is accompanied by a broader slowdown in global growth.
However I believe it is a value stock for the patient investor to consider. I hold it in my Shares and Shares ISA and plan to increase my holdings when I next have cash to invest.
Over the long term, the outlook for large mining stocks like these remains compelling. Rio Tinto – with a market-cap of £59bn – has the ability to weather temporary weakness in steel prices.
Expertise across a range of commodities including copper, iron ore and lithium means it is well-positioned to benefit from increased demand when the market’s upturn comes to an end. Factors such as global decarbonisation, the growth of the market and the growing digital economy should all increase the use of industrial metals from current levels.
In addition, a strong balance sheet gives Rio room to boost earnings growth through organic acquisitions and investments. The latest financials showed its total debt to EBITDA ratio at only 0.4 times.
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