The FTSE 100 has slipped back below 7,000 points after a short period of optimism. This appears to be due to inflation fears and the ever-present threat of Covid-19. Thankfully, I see a dip as the perfect opportunity to snap up some strong businesses.
And I believe there are plenty to choose from. In recent years, Brexit, international trade wars and the pandemic have hurt FTSE 100 shares. While it’s been a challenging time for many, it’s also led companies to streamline, meaning several could emerge over the next few years in a much stronger position. And thanks to the vaccine rollout, I now see light at the end of the tunnel for the FTSE 100 as a whole.
My favourite FTSE 100 stock picks
So, which businesses do I like the look of? BAE Systems, Diageo, Rentokil, and AstraZeneca (LSE:AZN) all look good, I think.
With a long-term investing horizon, I don’t worry too much about intermittent market fluctuations. I prefer to look at the bigger picture when deciding which stocks to buy. And for each of these businesses I see a long and strong future ahead.
International relations are precarious, geopolitical headwinds are always there and hacking attempts seem to appear in the news regularly. This tells me defence and national security are sure to remain priorities in the years to come. That’s one reason I like BAE Systems, because it has strong government ties and expertise in this area.
Reopening and emerging from the pandemic is likely to encourage socialising, which goes hand-in-hand with alcohol consumption. Therefore, I think Diageo with its impressive portfolio of popular brands is another that should continue to stand strong in the coming years.
Then there’s Rentokil. I like this business because hygiene and pest control are two areas of increasing importance considering the damage the pandemic has done. Rentokil has a far-reaching global presence and the ability to solve both these problems. That’s why I’d happily invest in RTO shares.
Why I like AstraZeneca
Finally, I like AstraZeneca’s future prospects in the pharma sector because health R&D is another key focus for government budgets. AZN sells leading oncology products and as the world increasingly battles cancer, AstraZeneca is in a good position to help. Meanwhile, its Farxiga brand is used to treat type 2 diabetes, certain kinds of heart failure and now chronic kidney failure. These are all health conditions on the rise.
The FTSE 100 pharma giant has a price-to-earnings ratio of 46, its dividend yield is 2.5% and earnings per share are 172p. Its Q1 results were excellent, showing clear signs of growth and a rise in revenues.
The AstraZeneca share price is down 21% from its 52-week-high after negative press surrounding its Covid-19 vaccine rollout. I don’t worry about this too much as the vaccine is not a core part of its business.
It’s important to keep in mind that all investments carry an element of risk. Each of these companies could see their share prices suffer if they fail to achieve their growth targets or Covid-19 variants cause further havoc in the markets. But these are risks I’m willing to take. I’m looking to buy and hold shares for five to 10 years and I’d feel confident doing that with these four FTSE 100 stocks.