This has been a washout year for many stocks. Even if many FTSE 100 shares have bounced back since the stock market crash in March, companies’ performances has been affected. And for many companies, performance is likely to remain dampened even though a V-shaped recovery is looking quite likely now. This is because the sustainability of the recovery is itself in question. The market’s bounce back is a result of the easing of lockdowns. But with government support for businesses expected to be withdrawn in the next months, I reckon the economy will be impacted.
FTSE 100 shares to buy
But that shouldn’t deter the savvy investor from buying FTSE 100 shares. I think many shares can perform well in 2021 and beyond. One example is the London Stock Exchange Group. It’s one of the most expensive FTSE 100 stocks, going by its current price-to-earnings (P/E) ratio of 79 times. But it has also been a strong performer for a while now. I reckon its earnings ratio will remain elevated going forward as well. This is because it’s not just a good growth stock, but at a time when other companies are cutting dividends, it has actually increased the interim dividend.
The second stock I’d buy is the industrial equipment rental company Ashtead. Like LSE, it too saw slightly increased dividends. This adds to the company’s confident outlook and robust financial health, even during these difficult times. This FTSE 100 share comes with the added benefit of a comparatively lower P/E ratio of 16.3 times. I reckon that even if the economy recovers slowly, AHT will continue to grow, going by the pickup already visible in construction activity.
Finally, I’d buy the FTSE 100 share DCC, which provides sales and marketing services for sectors like oil and gas, technology, and healthcare. Like both LSE and AHT, its financials are broadly robust. Its top line did take a hit for the year ending 31 March 2020 but its profits still grew. It’s not quite as low priced as AHT, with a P/E of 27 times, but it’s nowhere comparable to LSE either. Further, like both AHT and LSE, DCC too is a dividend-paying stock.
More alternatives
And these are just three FTSE 100 shares that can set up the investor portfolio for gains in 2021. Other stocks I like are the hygiene and pest control provider Rentokil Initial, which is poised to make gains because of increased focus on hygiene. Pharmaceutical biggies like AstraZeneca and GlaxoSmithkline are other stocks on my radar for further developments. While AZN is also a pricey stock, just like LSE, its activities don’t show any cause to collapse anytime. The contrary, in fact.
For investors with a bigger risk appetite, cyclicals like real estate and consumer discretionary goods are ones to consider. FTSE 100 real estate stock Persimmon is one I have long liked and in the consumer goods category, I like Burberry for reasons of longevity, improvement in the Chinese market, and overall better times for retail stores compared to the lockdown period.