The FTSE 100 has fallen by 25% so far this year. I think this dramatic decline has probably created some long-term buying opportunities. My focus now is on hunting down bargain shares to buy for long-term income and growth.
Today, I’ve picked five FTSE 100 shares I’d buy for a starter portfolio. I believe they’re all likely to outperform the market over the coming years.
A lockdown winner
One company that has continued to trade well this year is consumer goods group Unilever, whose UK brands include Domestos, Hellmann’s and Persil.
A slump in ice cream sales means profits for the year are expected to dip. But at-home demand is strong, and Unilever’s high profit margins and strong cash flow look safe to me.
The shares have pulled back from recent highs, but Unilever’s share price is still up by 55% over the last five years. This is a share I’d buy today for a long-term portfolio.
Packaged for long-term growth
My next pick is packaging group DS Smith. So far this year, the company has seen weaker demand for industrial products offset by strong demand for e-commerce and grocery packaging.
I’ve owned this share for a while and believe that having bedded down recent acquisition, the company is now moving into a more profitable phase.
DS Smith shares look decent value to me, on just 12 times forecast earnings. Dividends are expected to resume and could yield 4.6% next year. This is a share I’d like to buy more of.
My top healthcare pick
I’ve avoided hot pharma stocks and vaccine hopefuls this year. I don’t have the expert knowledge to know which of these small companies have the best chance of success.
However, one healthcare stock where I’ve doubled down my personal holding is FTSE 100 group GlaxoSmithKline. I explained recently why I think this stock could be worth a lot more in the future.
Right now, GSK shares are trading on 11 times 2021 forecast earnings, with a dividend yield of 6.2%. For a business that generated an operating margin of 21% last year, I think that’s too cheap.
A share I’d buy for the next decade
Industrial group Johnson Matthey currently makes most of its money producing catalytic converters for cars and trucks. This business could come under threat if the world shifts more and more towards electric vehicles, but the company’s 203-year history suggests to me that it will adapt.
Areas where JMAT is targeting growth include pharmaceutical ingredients and battery technology. The stock is down by nearly 30% this year and trade on just 12 times forecast earnings. I’d be happy to buy JMAT shares for my portfolio at this level.
Profit from global growth
Nothing stays the same forever. I believe the world will eventually recover from Covid-19. When it does, I think advertising group WPP should be a great way to profit from the recovery.
As one of the world’s largest ad businesses, WPP is exposed to most parts of the global consumer economy. I was reassured to see last week that revenue has only fallen by 10% so far this year. In my view, that’s a solid result in the circumstances.
Broker forecasts suggest that WPP shares could offer a dividend yield of 6.5% next year. I already own the shares, but I’d buy more at this level.