If I had £3,000 to invest right now, I would buy a basket of FTSE 100 stocks. Here are three companies on my watchlist.
FTSE 100 stocks
The first company on my list isn’t really a business in the traditional sense. It is an investment group.
Pershing Square Holdings (LSE: PSH) is the publicly traded investment vehicle of the US-based Pershing Square hedge fund. This fund is headed by one of the world’s most successful hedge fund managers, Bill Ackman.
The company owns a basket of US stocks and shares. Ackman and his team select these stocks. I think this is an excellent way to invest in some of the fastest-growing, highest quality US businesses.
However, it might not be suitable for all investors. The portfolio only contains a handful of equities. At the end of March, the fund owned just nine stocks. Therefore, there’s a significant risk that the manager could invest a large amount in a stock that fails to live up to expectations.
Despite this risk, I would buy the FTSE 100 company for my portfolio to gain exposure to US stocks.
Tech champion
Auto Trader (LSE: AUTO) is one of the largest public UK tech businesses. Its digital automotive marketplace has become the go-to destination for consumers who want to buy and sell vehicles. As a result, since 2016, net income has jumped from £127m to £205m for 2020.
City analysts are expecting this growth to continue. They have pencilled in a net profit of £210m for 2022, although this is just an estimate at this stage.
Still, based on this projection, the stock is trading at a 2022 P/E of 26. I think that looks cheap compared to the tech sector median of 32. Considering this valuation and its potential for growth in the long run, I would buy Auto Trader for my portfolio of FTSE 100 shares.
One big challenge this company faces is remaining relevant in the increasingly competitive online marketplace. If management fails to invest enough, it could be overtaken by smaller competitors. That would have a significant impact on Auto Trader’s growth rate and could hurt the share price.
Phoenix from the ashes
The performance of Standard Life Aberdeen (LSE: SLA) has been mixed over the past few years. Assets have fled the business in favour of other fund managers that have a better track record and charge lower fees.
The company is trying to rectify these issues. It has been selling off non-core assets and low-return businesses. The proceeds are going back into the business. I think there’s a high chance these growth initiatives could help the corporation emerge stronger in the next few years.
Unfortunately, this recovery isn’t guaranteed. As such, the stock might not be suitable for all investors. The asset management industry is incredibly competitive, and there’s no guarantee investors will return to Standard Life’s offering.
The company faces an uphill struggle, but I’m encouraged by the strength of its brand, which could help the business’s relationship with customers. That’s why I would buy the FTSE 100 stock for my portfolio today.