It might seem paradoxical that the FTSE 100 has just powered to a new all-time high when the UK economy remains stagnant. But many of the index’s biggest constituents generate the bulk of their revenues overseas, thereby making it far less tied to domestic fortunes.

Yesterday (10 July), the FTSE 100 finished the day at a record 8,975 points, and is now up by more than 9% this year (beating the S&P 500). Over three years, it’s returned over 30% (including dividends)! That’s a solid showing.

Despite this, these two Footsie stocks still look cheap to me.

Potential turnaround stock

The first is JD Sports Fashion (LSE: JD), which now has 4,871 stores worldwide. I’m due a visit to my local one actually for a new pair of gym trainers, which is perhaps why JD is on my mind.

The stock has struggled badly, falling from 186p in early 2023 to just 88p today. And the chief culprit has been Nike, a key partner that reportedly makes up nearly half of JD’s sales.

The US sportswear giant took its eye off the ball in recent years, allowing newer brands like HOKA and ON to nip in and steal market share.

However, Nike has new management and is working hard to reignite the growth engine. The JD and Nike share prices tend to trade in tandem, so any success at Nike would be great news for the UK retailer.

That said, tariffs remain a risk. Nike and other sportswear firms manufacture their wares in Asia, and President Trump has just reinstated “reciprocal tariffs” on several Asian countries. If these companies raise prices, consumer demand could slump further, hurting JD’s sales.

Looking at the valuation though, I have to imagine that much of the bad news is already baked in here. Based on current estimates for next year, the stock’s forward-looking price-to-earnings (P/E) ratio is just 6.8. By contrast, Nike’s forward P/E ratio is 42.

Given that JD also sells ON, HOKA, Adidas, and many more brands, I think this cheap stock is worth assessing at 88p.

Positive long-term trends

The second FTSE 100 stock that looks cheap is Melrose Industries (LSE: MRO). It’s up around 92% over five years, but 21% lower than a high reached in March 2024.

Through its subsidiary GKN Aerospace, Melrose produces engine parts, landing gear, electrical wiring systems, and other components for the likes of Rolls‑Royce, Airbus and Boeing.

It also provides lucrative aftermarket services and maintenance, generating recurring revenue through long-term contracts and risk‑sharing partnerships across the lifecycle of aircraft and engines.

Shareholders should see decades of cash flows from the engines aftermarket, with profits that should grow substantially.

Melrose Industries. 

In many ways then, Melrose should benefit from the same positive trends lifting Rolls-Royce (rising global travel and defence spending). Indeed, it’s arguably a lower-profile, more diversified way to play the aerospace upcycle.

The stock is trading at 14.5 times forward earnings, versus nearly 37 for Rolls-Royce. 

Naturally, Melrose shares similar risks with Rolls-Royce, especially a downturn in global travel from some sort of shock (war, pandemic, etc). The dividend yield is also tiny at just over 1.1%.

However, with the stock currently trading 17.5% lower than the average analyst consensus, I think Melrose is one to consider at 530p.