As the UK economic recovery starts to gain traction, I’ve been looking for FTSE 100 stocks to buy for my portfolio.
Here are five blue-chip companies I’d buy with £5k today.
FTSE 100 recovery shares
The way I see it, there are two ways for me to invest in the economic recovery. Either buying cyclical companies such as industrial and manufacturing firms, or investing in consumer businesses. These consumer businesses may see higher revenues in the months and years ahead as consumer incomes recover. Higher incomes should lead to increased discretionary spending.
On this point, I would buy FTSE 100 airline IAG. The owner of British Airways has been in hibernation mode since the end of last year.
Nevertheless, initial indications show that customers are eager to return to the skies, which suggests that this company could be a great recovery play.
However, it’s not for the faint of heart. IAG has built up a considerable amount of debt over the past 12 months. This could inhibit its ability to survive if there were another wave of coronavirus.
I think easyJet sits in the same bucket. The company has been in survival mode since the end of February last year. Another wave of coronavirus could be the final nail in the coffin for the business. Many other airlines have already collapsed under the weight of growing debts and uncertainty.
Still, I would buy the stock alongside IAG in my portfolio as a recovery investment. When overseas travel was briefly allowed last summer, easyJet reported strong demand for its services. We could see the same thing happen this time around. That’s why I would buy this FTSE 100 airline for my £5k portfolio of recovery investments.
These are my two high-risk FTSE 100 consumer plays. Alongside these companies, I would buy the industrial businesses below for my £5k portfolio.
Stocks to buy
The first industrial FTSE 100 company I would buy is Weir. This industrial engineering business provides critical components for the mining sector. I think it should see increased demand for its products and services as the economy recovers and countries spend more on infrastructure. That said, the resource business can be incredibly cyclical. Therefore, Weir’s recovery may be far more volatile than other companies in the industrial sector.
I’d also buy Spirax-Sarco Engineering for my £5k FTSE 100 portfolio. This company designs, manufactures, and maintains steam systems. Its experience and technology is highly respected, which gives the enterprise defensive qualities.
Analysts reckon Spirax’s earnings could increase by around 20% over the next two years as the economic recovery gains pace. The biggest challenge the company faces is maintaining product quality. If it skimps on this, it could lose its defensive aspect, and customers may go elsewhere.
The final company I’d buy for my FTSE 100 portfolio is testing quality assurance firm Intertek. Higher levels of economic activity could translate into higher sales as new products are developed and require testing. This is also a business where reputation counts. Intertek could suffer a customer exodus if its quality is compromised. Investors could end up with significant losses if Intertek starts to overlook this key issue.