The FTSE 100 has performed well over the past few months, with it now firmly over 7,000 points. This has been driven by the successful vaccine rollout and optimism among investors of a strong economic recovery. Nonetheless, I believe this has left certain stocks overpriced, and vulnerable to a correction in the near future. Therefore, it’s very important to be discerning when picking stocks, and these three FTSE 100 stocks are what I’m looking at closely for my portfolio in June.
A drinks giant
Diageo (LSE: DGE) has always been one of my favourite FTSE 100 stocks, and after its improved profit forecast for 2021 I’m even more optimistic. Indeed, Diageo now expects organic profit to grow by at least 14% in the year ending June 30. This announcement caused the Diageo share price to rise 4% on the day.
But I believe that there’s further to rise. For instance, alongside the profit forecast, the company also stated that it was resuming its share buyback programme. This means that shareholders can expect £1bn of payments by the end of the 2022 financial year, demonstrating that the company’s liquidity is strong. That said, share buybacks can be a sign of limited growth and expansion opportunities, and this is a risk that much be considered with Diageo shares.
A poor performing FTSE stock
GlaxoSmithKline (LSE: GSK) has really struggled over the past year, with the shares falling by 18%. In the Q1 trading update, it was revealed that revenues have also fallen by 18%, demonstrating that the company may have limited growth ahead. Investors have also raised doubts about the future of CEO Emma Walmsley, querying whether she’s the right person to lead the FTSE 100 pharmaceuticals giant.
Despite these problems, I’m more optimistic about GSK stock. Indeed, I can see changes incoming, especially once the consumer healthcare arm is spun off. This will allow GSK to focus solely on pharmaceuticals and vaccines. Personally, I think this simplification of the business is much needed, and I feel that it can return the renowned FTSE 100 stock back to growth. This is why GSK is one of my top stocks for June.
An oil giant
BP (LSE: BP) was one of the poorest performers in the FTSE 100 last year. However, with oil prices recovering fairly well recently, I feel that now is a good time to buy the stock. In fact, its reported profit in the first quarter was $4.7bn, compared with a loss of $4.4bn the year before. This demonstrates how the stock has managed to recover well.
Further, BP has also managed to reduce its debt significantly. As such, it’s now able to return more money to shareholders through share buybacks. This is a sign of optimism for the company, while also demonstrating that the shares may be too cheap.
On the other hand, oil is a risky investment, especially with questions over its future. Despite BP transitioning more into renewable energy, there are still risks over its long-term future. This must be considered in relation to the BP share price.