Having £1,000 to put to work is a great feeling. It’s enough money to make a difference if the investment pays off. If I don’t need the funds in the near term, then I can look to buy shares in companies that I believe in for the long term. With this in mind, which FTSE 100 stocks would I buy right now?
A conservative stock to buy now
The first company I’d look at is Smiths Group (LSE: SMIN). It’s not a company that crops up a lot when talking about high-growth stocks to buy now. I think this is due to the fact that it’s a mature, diversified engineering group. However, this doesn’t mean that I can’t still achieve strong share price returns.
Over the past 12 months, the Smiths Group share price is up almost 40% following the stock market crash. Given that some are concerned about the potential for another crash this year, I think the stock offers the right blend of defensiveness but also opportunity.
The defensive element to buying the stock right now comes from the industry. Smiths Group operates in several divisions including defence, electronics and medical.
The opportunity side comes from a transformation process that started last year. The total costs of this is expected to be around £60m, but is anticipated to save £70m a year from 2022 onwards as the business takes on a more efficient structure. One element of this is the demerger of the medical division.
A risk to buying the stock now is the fact that the dividend payout was increased by 6% despite operating profit falling 11% in the six months to the end of January. Personally, I’d want to see cash retained in the business to support the transformation and fall in profit, to avoid unnecessary stress on cash flow.
Getting access to a successful fund
Next up is Pershing Square Holdings (LSE: PSH). This is an investment fund run by Bill Ackman and his team. It operates as a public listed stock like Scottish Mortgage Investment Trust. In short, the share price should track (with some deviation error) the value of the underlying investments within the fund.
Last year was a stellar year for the company, thanks to the volatility seen in the markets due to the pandemic. From being active and buying and selling at the right time, the share price is up 80% over the past year.
Even though volatility has died down in recent months, I still see Pershing Square as a great buy right now. This is because of the continued optimism I’m seeing in global markets (particularly in the US). Earlier this month, the Dow Jones and S&P index made fresh all-time highs. Since well over 50% of the stocks held are based in the US, I think this bodes well for the share price.
The risk with Pershing Square is that it has the potential to make large losses, as well as large profits. Bill Ackman has had a colourful career as an investor. In 2017, he lost over a billion on an investment in Valeant Pharmaceuticals. So it’s clear that although returns recently have been great, I need to be careful.