The FTSE 100 is home to many stocks capable of withstanding the current economic storm. Proof of that can be seen when looking at the index’s relatively flat performance versus the double-digit tumble of the FTSE 250 so far this year.
While it’s not a guaranteed safe haven, the large size and established nature of FTSE 100 stocks could make them perfect additions to a defensive portfolio. With that in mind, I’ve spotted two shares that I believe can help protect and grow my wealth through an inflationary environment, even if I only have £100 to invest.
One of the best FTSE 100 stocks to buy now?
Regardless of what the economy is doing, people still need to eat and drink. And for consumer staple retailers, sales may even pick up as more people avoid expensive restaurants and takeouts.
A popular FTSE 100 stock in this space is Unilever. But lately, it seems the pricing power of its brands may have reached its limit. And suppose the UK falls into a severe recession. In that case, store-brand products could see increased sales volumes versus premium brands from Unilever’s collection.
That’s why today, I think Tesco (LSE:TSCO) is the better buy for my portfolio. As a reminder, the company is the largest supermarket chain in the UK, controlling 42.2% of the British grocery market.
Looking at its latest quarterly results, like-for-like sales are on the rise, primarily thanks to the performance of its Bookers wholesaler division. However, the firm is facing increased pressure from discount retailers like Aldi and Lidl. And the introduction of price-matching schemes has hit profit margins.
But, it’s important to remember that Tesco is in the sales volume business. Therefore, even this hurdle hasn’t stopped management from boosting dividends. While I doubt my portfolio will enjoy any explosive growth here, the long-term income prospects remain solid in my eyes.
Stock pick #2
DS Smith (LSE:SMDS) is another boring FTSE 100 stock that hasn’t been as lucky lately. In fact, the stock has tumbled by over 40% in the last year. That’s quite the opposite of what I’d generally expect from a stable cardboard manufacturer.
With the drop off in consumer spending on discretionary items, the e-commerce sector is undoubtedly facing some strong headwinds. And since DS Smith provides the packaging materials used by online retailers, it’s not surprising to see the share price suffer.
In its September trading update, management confirmed the group is enduring inflationary pressures. And that sales volumes for corrugated boxes have taken a hit. However, these figures are being compared to 2021, which was an exceptional year for e-commerce.
Moving forward, the firm’s outlook for 2023 remains unchanged, even with all these external factors bearing down on the business. And with multiple directors recently going on a £168,000 shopping spree buying up shares, there appears to be a lot of internal confidence.
Pairing this with a 5.7% dividend yield courtesy of the price drop in 2022, I think a buying opportunity for this FTSE 100 stock has emerged for my portfolio.