Money has flooded into cyclical recovery stocks in recent months. With the rollout of vaccines, many investors have viewed FTSE 100 shares in the financial, oil, mining, travel and hospitality sectors as the best to buy.
Conversely, many previously-favoured ‘quality’ stocks have been weak. Indeed, the 10 FTSE 100 shares I’d like to buy today are as much as 27% off their 52-week highs. I think the market is giving me an opportunity to invest in some wonderful businesses at attractive prices.
The FTSE 100 shares I’d like to buy
The table below shows the current prices of my top Footsie buy-list stocks and the discounts to their 52-week highs. It also shows long-term performance in their annualised 10-year returns.
|
 |
Current share price (p) |
Discount to 52-week high (%) |
10-year annualised return |
|
Avast |
462 |
-23 |
n/a* |
|
Diageo |
2,813 |
-8 |
+11 |
|
Halma |
2,267 |
-13 |
+22 |
|
Hikma Pharmaceuticals |
2,236 |
-17 |
+12 |
|
Intertek |
5,356 |
-17 |
+13 |
|
Reckitt Benckiser |
6,000 |
-25 |
+9 |
|
Relx |
1,693 |
-13 |
+14 |
|
Rightmove |
565 |
-17 |
+21 |
|
Sage |
559 |
-27 |
+9 |
|
Smith & Nephew |
1,386 |
-23 |
+8 |
* Annualised 25% since listing on the stock market in May 2018
As you can see there’s a big contrast between the recent performance of these FTSE 100 shares and their longer-term returns. I think this makes the discounts (and the businesses) attractive.
Technology stocks
Avast is a global leader in digital security and privacy products. Sage, is in accountancy technology for small and medium businesses. Relx, another global business, owns unique databases and analytical tools. And Rightmove is the UK’s dominant property portal.
The strength of the businesses in their respective markets is what appeals to me. But I’m also aware there are risks with each of these FTSE 100 shares.
Floated in 2018, Avast doesn’t have a long pedigree as a public company. Sage comes with execution risk, because it’s transitioning away from licence sales to subscription revenue. Meanwhile, Relx’s exhibitions business has suffered badly over the last year, and there’s uncertainty about the timing and level of recovery. Part of Rightmove’s growth has come from regularly ramping up its prices, but such increases may not be sustainable long term.
Brand powerhouses
Global consumer goods giants Diageo and Reckitt Benckiser are also FTSE 100 shares I’d like to buy. The former owns great spirits brands, such as Johnnie Walker whisky and Smirnoff vodka. The latter owns popular hygiene and health brands, such as Dettol and Gaviscon.
Still, I’m mindful there’s a risk traditional brands could come under pressure. This is because new media and structural changes in retailing have significantly lowered the barriers for fresh brands to enter the market.
FTSE 100 healthcare shares
I believe healthcare is an attractive sector, due to ageing populations. Medical devices group Smith & Nephew and pharma firm Hikma are my favoured shares to buy in the sector. I think they have good scope for growth.
Having said that, Smith & Nephew has suffered from postponements and cancellations of elective surgery over the last year, and there’s a risk recovery may take some time. Meanwhile, with a big focus on generic medicines, Hikma is exposed to the risks of costly legal battles and setbacks on regulatory approvals of its products.
Safety first
Finally, health & safety technologies specialist Halma and quality assurance provider Intertek are other FTSE 100 shares operating in markets where I see strong structural drivers for growth.
Acquisitions have been a big part of both companies’ strategies. By contrast to firms focused solely on organic growth, failures in due diligence or integration are risks for acquisitive companies like Halma and Intertek.