Through the 2020 stock market crash, I’ve thought of shares to buy, rather than wanting to sell. Many share prices have now strengthened, but I’m still seeing a lot of bargains around. So in the coming months, what should I buy?
Specifically, I’m thinking how I might invest £3,000 in new FTSE 100 shares that I don’t already own, rather than topping up any favourites. And I’m looking for sectors where I don’t already have an interest. I have plenty of candidates currently on my shortlist.
I’ve had Rio Tinto (LSE: RIO) down as a candidate for some time. I’ve often considered mining and commodities stocks to be among the best shares to buy for the very long term. They produce the key raw materials that underpin the entire global economy, and those will inevitably always be in demand.
For a while, slowing Chinese growth held back metals and mineral prices. But though they’ve been recovering, the Rio Tinto share price is still only up 10% over the past decade. The downside is that the commodities market is cyclical, and institutional investors might see the gains of the past few years as enough for now. And we still face big economic uncertainty. But a forecast 10% dividend yield in 2021, with decent cover, keeps Rio Tinto on my list.
Pharmaceutical shares to buy now?
My next pick is in a sector that I have neglected for far too long. It’s GlaxoSmithKline (LSE: GSK). I have owned pharmaceutical stocks, a long time ago. And along with AstraZeneca, Glaxo has come close to the top of my list on numerous occasions. But it’s always been beaten by something I like better on some key metric.
Most recently, when I was looking for dividend shares to buy in 2020, Glaxo nearly made it. But it was pipped by City of London Investment Trust with its 54-year history of dividend rises. The GlaxoSmithKline share price has gone nowhere in the past five years, so I haven’t missed any gains. But there’s a downside in the dividend having remained static for years. And we haven’t yet seen the earnings growth needed to get it moving again. Still, it yielded 6% in 2020, and that’s the kind of income I like.
It’s hard to choose between these two
Finally, I don’t have anything in the aeronautics, defence, engineering or industrials fields. Over the years, I’ve come close numerous times to investing in Rolls-Royce or BAE Systems. I see both as strong companies for long-term investments, though Rolls has had a horrible time during the pandemic.
BAE might be tempting because its shares have been more resilient through the crash. Alternatively, Rolls-Royce could be one those shares to buy now precisely because its depressed share price looks undervalued. The big risk is that Rolls’ refinancing turns out to be insufficient to see it all the way through, and a further cash raise could damage the shares further.
With BAE, there’s uncertainty in the way international weapons sales might go, especially as the company is very big in Saudi Arabia. But right now, BAE would get my nod due to its dividend prospects.