2 battered FTSE 100 stocks that could explode when the market recovers! – Motley Fool UK

The UK index is pretty volatile right now, but that’s only half the story. Today, I’m looking at two depressed stocks that could explode next year.
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These two FTSE 100 stocks are by no means the worst performers on the index this year, but they haven’t done well.
And while the market isn’t universally down — some areas like oil, energy and mining have done pretty well this year — a dip is good time to buy those stocks I really believe in.
So here are two companies that I’d buy for a future recovery when I have some spare cash.
Barratt Developments (LSE:BDEV) is down 40% over the past year. However, this belies some pretty positive performance data.
The firm recently said that in the year to 30 June, adjusted pre-tax profit grew 14.7% to a record £1.05bn, with revenues up 9.5% at £5.27bn, as completions increased 3.9% to 17,908. That completions figure is broadly in line with pre-pandemic levels.
The firm is offering a sizeable 8.1% dividend yield, which appears to be well covered by earnings. It’s also well-supported by Barratt’s £1.1bn net cash pile.
Looking forward, and based on current market conditions, Barratt is targeting total home completion growth of 3-5% in FY23, to between 18,400 and 18,800 homes.
So there are many positives. But why is the share price down? Well, things aren’t looking too rosy for the housing market right now. Interest rates are rising and could reach as high as 4% in 2023. And that will likely push house buyers to defer their purchases.
But, along with the cost-of-living crisis, this means house prices are unlikely to increase. Berenberg contends that house prices will remain flat over the next year while cost inflation will sit at 5%. Therefore, it’s likely that margins might suffer over the next year.
Despite this, I see Barratt as a good place to put my money right now. The stock hasn’t traded this low for nearly a decade, and when the housing market recovers, I think it could explode.
Burberry (LSE:BRBY) is suffering this year and that’s largely a result of lockdowns in China. In its first quarter report, the luxury fashion house said that same-store sales increased just 1% year-on-year as sales were impacted by lockdowns across mainland China. The stock is down only 3% over the year, but around 15% since February.
However, Burberry remains upbeat on its ability to continue growing. The business is targeting high-single-digit percentage revenue growth and 20% margins “in the medium term”. And analysts are positive too. The City expects earnings to advance by almost 27% in the current trading year to April 2023.
China really is an important part of the Burberry business. Excluding mainland China, comparable store sales grew 16% in the first quarter. The big question is, will China continue with its lockdowns, or adopt a more business-friendly approach? I’m certainly hoping for the latter.
A recession could create challenges for retailers like Burberry but, equally, luxury fashion is often fairly resilient. Despite the economic headwinds, I’d buy Burberry with the expectation that the business will really move forward as China opens up from Covid. A weak pound should also inflate GBP earnings.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.
James Fox has positions in Barratt Developments. The Motley Fool UK has recommended Burberry. 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.
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