It has been seven months since the FTSE 100 crashed below the 5,000 level. But its performance is nothing to write home about even today. It has gradually lost much of the gains made in the weeks immediately following the crash. It’s now around the same levels it was later in April this year. As uninspiring as this sounds, I think there are still FTSE 100 investing options available. Here are five stocks I like.
Miners bounce back
FTSE 100 miners like Rio Tinto and Anglo American are two examples. The will get a fillip from China’s recovery. China’s economy is expected to grow at a 8%+ rate in 2021. China is a big industrial metals’ consumer. With its economy on track, multi-commodity miners like both RIO and AAL should benefit. While Covid-19 has affected all cyclical stocks, including miners, both these companies have been able to stand their ground.
Rio Tinto, for instance, has reported increased iron ore production in its recent update. It has also mentioned growing Chinese demand and recovering automotive sector and copper prices at a two-year high, which are big positives for the company. Rio Tinto’s share price recently suffered after it was found to have blown up ancient rock shelters in Australia, but the effect of this misstep will fade over time. It also means it’s not an expensive stock right now, and has a high dividend yield too.
Anglo American too, reported a positive production update recently, which suggests improved conditions that will be further bolstered by better demand next year. The AAL share price bounced back quickly after the stock market crash, and has remained strong since. Barring any unforeseen downturn, I reckon it will rise further from here.
A FTSE 100 cyclical to consider
With the China story in mind, I’d also consider buying the FTSE 100 British luxury brand, Burberry, which has recovered somewhat from the stock market crash. With a growing international market share, it’s poised to gain as the Chinese market revives.
Going defensive
Classic defensives like the FTSE 100 analytics provider Relx and the accounting software provider Sage Group are two other stocks I’d consider. A stock market crash naturally leads to money flow towards safe stocks. This has shown up in their share prices during and after the crash as well. Of course, all companies feel the impact of an economic slowdown, but companies in defensive sectors will feel it far less than those in discretionary ones.
In its recent trading update, Relx said that except for its exhibitions business, its revenue growth has improved modestly and should continue doing so in the future. Sage’s numbers are slightly less current, and refer to the first half of the year only, so far. They too, however, show revenue growth. I would buy these stocks on a dip in case of another stock market crash.