When it comes to investing, I’m a big believer in going for strength rather than weakness. To me, that means looking for shares backed by strong businesses performing well rather than weak businesses performing badly. And quite often operational strength reflects in share-price strength. So, would I buy any of yesterday’s top 10 FTSE 100 risers?
According to data on the Hargreaves Lansdown website, yesterday’s top-rising FTSE 100 stocks were Ocado, Compass, Landsec, BAE Systems, and British Land.
Is this list of FTSE 100 risers worth buying?
Online grocery retailer Ocado has been growing revenue at a brisk pace for several years. And the stock has been in a powerful uptrend since the autumn of 2017. Earnings are yet to materialise, but I’m mindful that Amazon grew for years without earnings and yet it is now one of the biggest-earning companies in the world.
The environment for Ocado’s services has been enhanced by the coronavirus crisis. And shoppers’ habits might have changed forever. Ocado’s operations are growing and the stock is strong. I would take an interest in this FTSE 100 company with a view to buying some of its shares to hold for the long haul.
Meanwhile, food service provider Compass looks set to recover from the collapse of its earnings that occurred because of Covid-19. City analysts have pencilled in a three-figure percentage resurgence in earnings for the trading year to September 2021.
However, the share price chart shows the share price just beginning to lift from a long period of consolidation. I think conditions are perhaps ideal for a recovery-based investment in the share, and I’d get interested in it right now.
Good value
Commercial property company Landsec saw the complete collapse of profits in its trading year to March 2020. At 542p, the share price is more than 45% below its pre-Covid-19 level of February. However, the valuation reflects the effects of weakening commercial property markets and the coronavirus crisis. Indeed, the price-to-tangible asset value sits below 0.5, which looks like good value.
Meanwhile, in July the company said its shopping centres, outlets and retail parks had reopened after the lockdown. And back then the firm was seeing “encouraging levels of footfall.” City analysts expect a robust resurgence in earnings during the current trading year. And I reckon the stock could make a decent recovery play as we emerge from the current economic troubles.
Meanwhile, trading conditions are very similar at real estate company British Land, which trades at a similar valuation to Landsec. I’d be happy to buy the shares too. As I would shares in defence, aerospace and security company BAE Systems. The company continued to trade through the coronavirus crisis yet the shares remain more than 20% below their February high.
At 520p, the forward-looking earnings multiple for 2021 is just below 11 and the anticipated dividend yield is a little under 5%. I reckon the valuation is attractive, and I’d be keen to pick up a few shares for my ISA.