The FTSE 100 has some great companies in its ranks. The UK’s leading stock index may be hovering round the 7,000 mark but here are five FTSE 100 stocks I’d buy today.
#1 – Sage
Accountancy software specialist Sage recently announced its half-year results. And the numbers showed strong momentum with encouraging organic revenue growth of 4.4%.
The FTSE 100 firm is undergoing a transformation. It’s migrating its customers to cloud-based software. It’s also placing a focus on recurring revenue. And if there’s one thing investors love, it’s sales predictability. This should boost the share price going forward.
It’s worth noting that the transition to a subscription business model will take time. Sage is also likely to incur extra costs, which may impact profitability.
#2 – Diageo
Diageo is my FTSE 100 reopening stock pick. It has a diversified beverage portfolio of over 200 brands. And as lockdowns start to ease, more people are likely to dine and drink out. This should help the company’s revenue and profitability.
It recently announced that it’s going to be returning capital to shareholders through share buybacks. This sounds encouraging and indicates to me that Diageo’s financial position has improved.
But the shares are still sensitive to any Covid-19 setbacks. And there’s no guarantee the return of capital will continue if conditions deteriorate.
#3 – Rolls-Royce
Last year was a horrendous one for Rolls-Royce, but I think the worst is behind it now. The vaccination rollout has been going well and travelling abroad now looks likely.
Management expects the company’s cash flow to turn positive in the second half of 2021. This is encouraging news. Rolls-Royce also has seen robust earnings from its Defence division, which it expects to continue.
But again, any ongoing Covid-19 issues are likely to hit the FTSE 100 stock and the business.
#4 – Lloyds
Lloyds is in a better financial position now than in the dark days of the financial crisis. Its 2021 strategy is to build out its small business offering as well as to focus on large corporates and institutional clients. Such a diverse customer base should improve and diversify the bank’s revenue prospects.
I think Lloyds has weathered the coronavirus storm well. The bank had to cancel its dividend due to pressure from the financial regulator. As the UK economy improves, I think a reinstatement of the dividend could be on the cards.
But headwinds remain. The bank still depends on interest rates to make money, which are at rock bottom and I don’t expect them to rise any time soon. This could impact profitability going forward.
#5 – Whitbread
I’m not surprised that Whitbread was a victim of the pandemic. After all, it’s the owner and operator of the budget hotel chain, Premier Inn.
As the economy starts to open up, people are likely to travel more. If not abroad, then a staycation or business trip in the UK is a possibility. Whitbread is well positioned to capitalise on this opportunity. It has a strong brand and a good reputation for offering value.
But the shares and the business could be hit by any delays in the easing of lockdown restrictions. Further coronavirus variants could also derail its recovery.