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3 FTSE 100 shares I’ll be watching in January

Paul Summers — Mon, 27 Dec 2021 13:34:55 +0000

The festive season has provided investors with some respite from what continues to be a tricky period for the UK market. However, it won’t be long before companies start releasing updates on trading. With this in mind, here are three stocks from the FTSE 100 that I’ll be keeping an eye on in January.

Fashion and lifestyle retailer Next (LSE: NXT) will be among the first companies to report to the market in 2022. A trading update, scheduled for 6 January, should serve as something of a bellwether for how well retailers have fared in the vitally important run-up to Christmas.

Considering just how challenging 2021 has been for some businesses, Next investors have had a fairly decent year. Boosted by pent-up demand from shoppers, shares have climbed 15% in value and outperformed the FTSE 100.

Whether this momentum has continued more recently is difficult to say. At 10%, full-price sales growth in Q4 is already expected to be lower than that seen in Q3. It could be even lower if the Omicron variant has succeeded in keeping people away from stores in December.

Still, Next doesn’t look overvalued to these eyes at just over 15 times earnings. That’s fairly average for its sector and pretty reasonable for such a quality company. On balance, I’m inclined to think there could be more upside ahead.

Tesco

Supermarket titan Tesco (LSE: TSCO) is another FTSE 100 company that’s down to report to the market and investors in early 2021 (13 January). Shares in the business are up 22% from where they started the year, far outpacing the index.

Recent research by Kantar suggests this rise isn’t unjustified. Tesco significantly outperformed its main rivals in the 12 weeks to 28 November. This resulted in a 0.7% gain in market share, taking its dominance back to a level not seen since February 2019.

It’s not been plain sailing though. In addition to dealing with the ongoing disruption caused by the pandemic, Tesco has also faced a difficult run-up to Christmas with the threat of industrial action by workers at nine of its distribution centres. A strike was averted after the company agreed to a new pay deal.

Tesco stock is currently trading for just under 14 times earnings. I’d be surprised if the company were able to replicate this year’s gains. Nonetheless, the 3.5% dividend yield should compensate for this.

Associated British Food

A final FTSE 100 I think is worth watching in the first month of 2022 is Primark-owner Associated British Foods (LSE: ABF). The company’s shares have done quite poorly in 2021, falling by almost 11%.

This feels a little harsh, especially as ABF’s diversified business model arguably makes it more defensive compared to other retailers. Moreover, the company recently announced that trading had been ahead of expectations and like-for-like sales in Q4 were better than in the previous year. ABF also said it was managing to cope with supply chain issues to such an extent that pre-Christmas trading was unlikely to have been affected.

Sure, the investment case isn’t bulletproof. Cost inflation could prove a near-term headwind. The seemingly perpetual pandemic could also have a few chapters left. The lack of online presence needs to be borne in mind too.

Even so, I think a P/E of 14 looks decent value for this top-tier stock. Anticipation of a positive trading update on 20 January could see the shares recover beforehand.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods and Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

This FTSE 100 growth stock looks cheap again!

Paul Summers — Mon, 13 Sep 2021 15:14:48 +0000

The share price of FTSE 100 constituent Associated British Foods (LSE: ABF) was lower in trading today. This followed the release of a trading update in advance of the end of its financial year.

What’s got the market so concerned?

Sales fall as ‘pingdemic’ bites

It all seems to be down to how the company’s Primark business has been doing.

Initially, things look pretty positive. This morning, ABF announced that Q4 adjusted operating profit from its retail arm was now likely to be higher than originally thought. As a result, full-year profit would also be ahead of last year. Primark’s margins also held up well due to a fall in costs.

However, lower than expected sales had been recorded at the FTSE 100 stock’s clothing shops. This was blamed on reduced footfall due to measures taken to address the spread of the Delta variant of Covid-19. This includes the now infamous ‘pingdemic’ period in which huge numbers of people were required to self-isolate.

Abroad, sales at Primark were also impacted by reduced tourism in countries such as Spain and Portugal.

Is it really that bad?

I don’t think so. While news of lower sales was never likely to be embraced, ABF said that trading at Primark had actually improved across the quarter. A 24% fall in like-for-like sales at the start of Q4 had reduced to an 8% decline in the last four weeks. Thanks to this, it now expects sales over the final three months to come in 17% lower than two years ago. Sure, that’s not great. However, the reasons for this recent negative momentum appear temporary.

In line with this, the company expects to continue opening new Primark stores around the world, especially in Spain and Italy. A refreshed customer-facing website, allowing shoppers to see more of the range as well as its availability in stores, is also in development. I see this as an essential move given the competition it faces from online-only operators.

Of course, ABF is also more than just Primark. The company’s sugar business, for example, is expected to register “an even greater improvement” in adjusted profit compared to last year. Elsewhere, brands such as Twinings and Ovaltine have been performing well, and the same goes for ABF’s ingredients and agriculture arms.

Cheap FTSE 100 stock

I remember highlighting ABF as being too cheap back in November. Its share price went on to climb as high as 2528p (roughly +28%). Now that these gains have been given up, I’m inclined to return to my original thesis. Analysts are expecting earnings per share to almost double in FY22, giving ABF a forward P/E of just 14.

This is not to say that aren’t problems ahead. Supply chain issues and raw materials inflation could get worse before they get better. The fact that UK sugar production has been a lot lower this year due to poor weather shows how uncontrollable events (other than the pandemic) can also hit other parts of its business.

Still, ABF’s diversified model arguably makes it more defensive than some of its high street competitors. Moreover, the company looks set to end the financial year in a solid financial position. Net cash should come in around £1.9bn. That’s up £300m on this time last year.

Once again, I’d be interested in acquiring a stake in ABF at this level.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The FTSE 100: next stop 8,000?

Paul Summers — Mon, 19 Apr 2021 06:09:11 +0000

Having breached the 7,000 barrier last week, I’ve begun to wonder when (and if) the top tier of UK businesses — the FTSE 100 — will eclipse its 2018 all-time high (7,903) and perhaps even charge across the 8,000 boundary.

Today, I’m looking at few arguments for why this may and may not happen in 2021.

FTSE 100: reasons to be bullish

There’s certainly no shortage of reasons to think that recent momentum might continue.

Regardless of anyone’s political persuasion and views on the overall handling of the pandemic, I don’t think there can be much doubt that the UK’s vaccination programme has been a success relative to many other nations. On paper, this should breed confidence in the ability of the economy to recover strongly.

Naturally, the more home-focused FTSE 250 gains the most here (demonstrated by its own new all-time high). Even so, there’s no lack of London-listed giants that stand to benefit from this positivity. Drinks firm Diageo should see better numbers as bars and pubs fully reopen. If last week’s great unlock is anything to go by, Primark-owner Associated British Foods should see a swift rebound in business. Gambling behemoth Flutter Entertainment stands to gain as people are allowed back in sporting venues.

Despite the 41% gain seen in the top tier since markets hit the bottom in March 2020, I think UK blue-chip stocks still offer good value. That’s even if they arguably aren’t as innovative and disruptive as the US tech companies are. Even so, I’d much rather buy great defensive businesses at a reasonable price than a loss-making stock at a gravity-defying price.

Then again, there are a few reasons to be cautious.

Dips in the road

For one, it’s important to recognise that many of the FTSE 100’s members do most of their business overseas. That’s clearly handy at times when UK plc is in the doldrums. I only need to look back at how share prices reacted during the Brexit process for evidence of this.

Then again, I need to consider the probability that our biggest companies will be held back by negative coronavirus news from abroad. Airlines such as IAG will naturally weigh on the index. So too will Intercontinental Hotels Group and engine-maker Rolls-Royce.

Another thing worth remembering is that a few sectors are heavily represented in the FTSE 100. These are finance, mining and oil and gas. If we believe that the FTSE 100 is only going up then we must also believe that the same applies to things like commodity prices. The excitement over renewable energy and electric cars could support this. Alternatively, this may priced-in to stocks like BHP Group already.

No rush

The FTSE 100 at 8,000? I’m can’t say it won’t happen in 2021. Nonetheless, another 14% gain or so from here in the next eight months is a big ask. That’s why I think staying the course is more important than setting arbitrary targets.

Equities are likely to remain the ‘best show in town’ for long-term investors. So, while no one can say for sure whether the FTSE 100 will eclipse previous all-time highs this year, we can hope that this record will be beaten eventually. And in the meantime, those invested in individual stocks or a cheap FTSE 100 exchange-traded fund can enjoy the dividend stream that holding shares (usually) provides.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of Flutter Entertainment. The Motley Fool UK has recommended Associated British Foods, Diageo, and InterContinental Hotels Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

3 FTSE 100 ‘reopening’ shares I’ll be watching in April

Paul Summers — Mon, 29 Mar 2021 06:32:16 +0000

The reopening of high streets next month could lead to some big moves in some retail stocks. Especially as stores will now be permitted to stay open until 10 pm. Today, I’m looking at three examples from the FTSE 100, all of which just happen to be reporting to the market in April.

First out of the blocks is clothing giant Next (LSE: NXT). It’s scheduled to release its latest set of full-year numbers to investors on 1 April.

Based on the performance of its share price over the last year, it’s hard to imagine there’ll be any nasty surprises. The market is always forward-looking and Next’s valuation has more than doubled since April 2020.

There are some that think there’s more to come. Last week, broker RBC upped its share price target to 8,800p on its belief the company will continue to benefit from its online offer, but also its decision to buy stakes in lingerie firm Victoria’s Secret and fashion label Reiss. RBC also suspects it won’t be long before Next restarts dividend payments.

I’m not about to disagree. Next has long possessed all the hallmarks of a great company. That said, it’s worth considering that consumers may direct their cash towards experiences rather than possessions in the coming months. Another potential concern is the possibility that online giants Boohoo and ASOS could steal some of Next’s customer base if their recent acquisitions bear fruit.

JD Sports

A second retailer scheduled to report full-year figures next month is leisurewear seller JD Sports (LSE: JD). Like Next, JD appears to have pivoted to its online offering pretty well during the crisis. It’s also preparing to enter new markets in central and eastern Europe and expand its US footprint.

Also like Next, JD’s share price has recovered strongly over the last year, soaring over 180%. By comparison, the FTSE 100 index is up ‘just’ 30%. Make no mistake, buying quality stocks when everyone else are losing their heads has the potential to be very lucrative.

Nevertheless, recent comments from executive chairman Peter Cowgill may unnerve a few holders. In an interview with BBC Radio in February, he remarked that Brexit has been “considerably” worse than he had expected. It’ll be interesting to see what the share price reaction is next month if this situation hasn’t improved.

Associated British Foods

A final FTSE 100 retail stock I’ll be watching in April is Associated British Foods (LSE: ABF).

Although nothing can be guaranteed, it’s possible that ABF may do better than most retailers in the weeks ahead. A lack of online presence could mean its Primark stores are more likely to be packed out on 12 April as shoppers look to replace the cheap threads they’ve worn out over multiple lockdowns.

Even if this rush doesn’t materialise, I think ABF shares could still do well. As I explained previously, the company benefits from a degree of sector diversification that most rivals don’t.

Naturally, there’s a flip side. Although the shares haven’t rallied as hard as the other FTSE 100 stocks mentioned, ABF certainly isn’t as cheap to acquire as it once was (26 times forecast earnings).

On top of this, there’s a chance those who’ve managed to save more during the multiple UK lockdowns will treat themselves to higher-quality clothes with a more sustainable profile rather than ‘disposable’ fast fashion.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of Next. The Motley Fool UK has recommended Associated British Foods. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I love these two UK shares, but one thing’s stopping me from buying them today

Harvey Jones — Thu, 14 Jan 2021 12:50:33 +0000

The following two UK shares have scope for growth and would make tempting additions to my portfolio. However, I’ve one worry. Both sell cheap fashion but their share prices are expensive.

The Associated British Foods (LSE: ABF) share price is holding firm today even though the group’s star attraction, budget clothing chain Primark, has just warned of a £1bn drop in revenues. The lockdown is biting, with revenues at the FTSE 100 group down 13% over the 16 weeks to 2 January, a loss of £540m. Primark’s revenues fell a thumping 40%, although trading was strong when stores were open.

If stores remain shuttered until 27 February, management says the loss of sales will total £1.05bn, up from the £650m predicted on 31 December. All they can do hope the vaccines work. That’s the story with so many UK shares right now. Either way, around £200m of unsold autumn/winter stock is piling up in warehouses.

Foods for thought

Primark doesn’t run an e-commerce operation alongside its high street stores, which wasn’t a problem until the pandemic. Investors expected bad news and have taken it on the chin, with the share price down only slightly. At least store closures cut operating costs by 25%.

Shoppers will fly back when stores do open, and the group is expanding across Europe and the US. However, future growth is priced in with the stock trading at 27 times earnings, at a time when many top UK shares are trading at bargain prices. There’s no dividend either for now.

Shares in online fashion rival Boohoo Group (LSE: BOO) are down around 4%, even though today’s trading update reported 40% sales growth in the final four months of the year, to £660.8m. Management even upgraded full-year sales growth guidance. The UK and US, which make up around 80% of revenue, were best performers.

I’m looking for cheaper UK shares

Boohoo is fighting back against a supply chain and working conditions scandal. It appointed High Court judge Sir Brian Leveson to provide independent oversight and, today, reported “significant progress” on its Agenda for Change programme. We hear a lot about how ethically-minded young people are these days but this hasn’t stopped them from splurging at Boohoo. At least management has reacted swiftly, even if it didn’t have much choice in the matter.

The group has relaunched the Oasis and Warehouse fashion brands on its multi-brand platform, alongside Nasty Gal, Karen Millen and Coast. Investors are concerned about shrinking margins, which slipped 50 basis points over the year to 53%. That may explain today’s share price dip.

The big worry is its valuation, as the Boohoo share price now trades at more than 60 times earnings. That gives little scope for underachievement. With net cash of £386.9m (up from £344.9m at the end of August), it has the funds to fuel further growth though, and may still outpace many UK shares in the longer run.

Boohoo may soon face the opposite problem to Primark. The end of the lockdown could hit its sales, as stir crazy shoppers flee back to the high street.

I reckon both will do well in the longer run. But their valuations make me feel other UK shares offer better opportunities right now.

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Prediction: by 2027, this battered FTSE AIM stock could turn £3,000 into…

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods and boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

These 2 FTSE 100 stocks have bags of recovery potential. Here’s what I’d do now

Harvey Jones — Fri, 11 Dec 2020 07:06:17 +0000

These are tough times for retailers with Arcadia Group and Debenhams going into administration, but some FTSE 100 stocks shares in the sector are better placed to thrive. In fact, they may even benefit, as competition on the high street shrinks.

I’m thinking of Primark owner Associated British Foods (LSE: ABF), and clothing chain Next (LSE: NXT). Both have shown their resilience in the pandemic, and this should stand them in good stead for the recovery. I’m considering adding these FTSE 100 stocks to my portfolio but are they too expensive right now?

The Associated British Foods share price tanked in March, falling 40% as Primark shut its doors in the lockdown. Its share price recovery has been slow, though. The most recent lockdown cost it £430m in lost sales, which is blow. The good news is that demand has since been “very strong” at stores that have reopened. It seems to have become a post-lockdown tradition to besiege Primark at the first change you get.

I like these retail sector survivors

ABF isn’t just about Primark and it also reported healthy trading in grocery, sugar, ingredients, and agriculture. Despite this, it still reckons profits will be higher than last year. With competitors like Topshop on the rack, this FTSE 100 stock has shown it has staying power. That’s particularly impressive given that it doesn’t sell online. It was also able to offset falling revenues in the lockdown, with a 25% drop in operating profits. Finding store space should not be a problem in future, either.

Sadly, this is another of those FTSE 100 stocks that does not offer a dividend right now, which was suspended earlier this year. What worries me more is that it looks expensive, trading at 29.1 times earnings. City analysts forecast that ABF’s earnings will grow 37% in the year to September 2021, so that valuation may be justified. On balance, I might check out these stocks instead.

Next has rebounded strongly from the March crash, with the share price jumping an impressive 84% from its lows. Once again, this underlines the benefits of buying shares in a market meltdown, as you can make big money when they rebound.

Next year should be better for these FTSE 100 stocks

The big attraction of Next is that it combines a thriving e-commerce operation with a legacy bricks and mortar business. This year has brought plenty of challenges, including closed stores, a plunge in formal wear sales, and capacity issues in its online warehouses. However, a 23.1% rise in Q3 online sales helped offset damage elsewhere.

In October, management forecast healthy full-year profit before tax of £365m, but warned that a two-week lockdown would reduce retail full price sales by around £57m. We will have to wait until its Q4 trading statement in early January to see the true damage, but I think Next is resilient. Investors will be hoping that shoppers remain free to spend in the run-up to Christmas.

My worry is that falling revenues have driven up the forward valuation to 30 times earnings. Again, there is no dividend. Next remains a top FTSE 100 retail stock and tempting buy, though.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK owns shares of Next. The Motley Fool UK has recommended Associated British Foods. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Cheap UK shares: this FTSE 100 company looks a bargain to me

Paul Summers — Mon, 09 Nov 2020 07:11:25 +0000

Thanks to an unsettling US election, Brexit and the coronavirus pandemic, there are still plenty of cheap shares in the UK market. As such, I think there’s lots of money to be made by buying low and adopting a medium-to-long-term perspective. The trick is learning to distinguish the wheat from the chaff.

One example of the former could be Associated British Foods (LSE: ABF).

Cheap UK shares

It’s easy to see why investors have been running from the £13bn-cap owner of Primark. Like many, the FTSE 100 company was hit hard by the first lockdown and the dramatic slowdown in retail sales. The second UK lockdown just makes things worse.

When combined with restrictions elsewhere in Europe, 57% of ABF’s total selling space is now temporarily closed. This will likely lose the company an estimated £375m in sales.

Notwithstanding this, ABF would be one of the very few retailers I’d consider buying at the current time.

For one, the FTSE 100 giant is much more than Primark. The company actually has its fingers in a number of different sector pies, including sugar, agriculture, and ingredients. Now, this diversification won’t guarantee the share price won’t have further to fall, but it does make ABF a more defensive option than your typical listed retailer. It also goes some way to making up for the fact that budget-focused Primark doesn’t sell online.

Another reason to suggest now might be a good time to buy into ABF is that finances still look pretty solid. At the end of its last financial year (mid-September), the company had net cash before lease liabilities of £1.56bn. That’s a far better position compared to others in the market’s top tier.

Trading at under 15 times earnings, ABF hasn’t been this much of a bargain for a while. Since clothes will always need replacing (and Primark’s value offering should appeal to shoppers during recessionary times), these cheap UK shares look to be anything but a value trap.

Undervalued

Another stock that I think is too cheap right now is soft drinks company Nichols (LSE: NICL).

Sure, recent trading hasn’t been great. Like others in the space, Nichols has seen revenue and profits tumble over 2020. This has been due to lockdowns and the closure of shops and travel concessions that sell its drinks. Seen in this context, the fall of the Vimto-owner’s share price back to where it was during March’s market crash does make some sense.

Like ABF however, I think there are reasons to be optimistic. The reinstatement of dividends back in June certainly smacks of confidence. I think it’s unlikely new CEO Andrew Milne would want to reverse that decision when he takes over the reins in January. The small-cap’s balance sheet is also in great shape. Nichols had almost £47m net cash in June.

A forecast price-to-earnings ratio of 16 for FY21 might not scream value but it’s important to put this in perspective. For years, Nichols traded far above this level, and justifiably so. Operating margins and returns on capital employed have long been consistently high.

Admittedly, I’m biased. I’ve held the stock for years. But I see the current price weakness as an opportunity rather than something to ruminate on. News of a falling infection rate and/or vaccine breakthrough could see these cheap shares fizz back to form.

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Paul Summers owns shares of Nichols. The Motley Fool UK has recommended Associated British Foods and Nichols. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Stock market crash bargain alert! I’d buy the Associated British Foods share price today

Harvey Jones — Thu, 02 Jul 2020 10:29:30 +0000

The Associated British Foods (LSE: ABF) share price jumped more than 7% this morning, despite warning markets that full-year operating profits are set to fall by two thirds. Such are the times we live in.

With everybody braced for bad news, the slightest glimmer of hope is something to celebrate. Associated British Foods is best known for its discount clothing chain Primark which shut all 375 stores in March due to Covid-19. Worse, it had no online shopping site, unlike many competitors.

FTSE 100 stock market crash opportunity

The move cost the FTSE 100 company £650m in lost sales every month. Today, it warned that Primark’s full-year adjusted operating profit will range from £300m-£350m for the full year, down from £913m last year.

Some investors forget that buying into the Associated British Foods share price gives you a sugar, grocery, agriculture and ingredients business as well. They’ll be remembering today. While Primark revenues crashed 75% in the third quarter, grocery sales partially offset this, rising 9%. Ingredients revenues rose 3%, sugar fell by 1%. Management expects “strong progress” in these areas over the next year. Diversification has benefits after all.

However, the focus is now firmly back on Primark. The retailer has now opened most of its stores in the UK and overseas, with avid shoppers forming queues from 5am on opening days.

Today, management says that trading in its reopened stores has been “reassuring and encouraging.” It reported strong demand for childrenswear, leisurewear and nightwear, and summer products, such as shorts and t-shirts. Formal menswear and travel-related accessories were weak, unsurprisingly. City centre stores have been hit by the lack of tourists, and much lower commuter footfall.

The Associated British Foods share price is back

Primark halted orders during the lockdown, but has now placed more than £800m for the autumn/winter season, and expects the total to top £1bn. It’s also restarted new store openings. To give you an idea of the group’s increasing international reach, locations include Belgium, Germany, France, Spain, Portugal, Poland and Florida. It will soon have 11 stores in the US, with more to come.

June trading looks promising, even without discounting. No wonder investors are piling into the Associated British Food share price today. As confidence grows, it should benefit from a wave of pent-up demand for fast fashion. Reading these results almost makes me believe in a V-shaped recovery.

In April, the FTSE 100 group suspended its dividend, while reassuring investors it has plenty of cash at its disposal, around £1.5bn. That should hold it in good stead, if we see a second wave of infections, or a wider slowdown.

Bricks and mortar retail is a tough sector, but Primark seems to have cracked it. The lockdown ‘cash burn’ is over. Now it can look forward to generating it instead. There’s no dividend, but that will be back at some point.

Despite today’s rally, the Associated British Share price is down almost 25% from its January peak. That looks like a stock market crash bargain to me. You might want to take a look at this too.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Stock market crash: I think these 2 FTSE 100 stocks could help you get rich from the recovery

Harvey Jones — Mon, 01 Jun 2020 11:38:43 +0000

After the stock market crash, plenty of FTSE 100 shares now trade at bargain prices. Investors are beginning to notice this too. If you buy top companies when their share prices are down, you can accelerate your plans to get rich and retire early.

You have just such an opportunity today. These two FTSE 100 shares have fallen far during the coronavirus crash, but are flying right now.

FTSE 100 recovery play

After a nervous Friday, investors have rediscovered their appetite for risk. The Standard Chartered (LSE: STAN) share price is up 6% this morning, as bargain seekers decide the potential rewards outweigh the risks.

Like all the banks, Standard Chartered has been hit hard by the stock market crash. Its focus on Asia and China made that inevitable. Unlike many FTSE 100 stocks, it failed to recover during April and May’s rebound. But it’s flying today.

Standard Chartered has also been caught up in rising tensions between China and the West, and concern over the Hong Kong clampdown. Its share price is still 45% lower than before the stock market crash, even after today’s rebound.

Standard Chartered is up today after US President Donald Trump surprised markets by failing to introduce new, more punitive trade measures in response to China’s new security law in Hong Kong. Shares rose across Asia amid relief that the trade war hasn’t further intensified.

Inevitably, the US-China stand-off remains a threat. Along with Covid-19, that explains why the bank trades at just six times earnings. Anybody who buys into the Standard Chartered share price must brace themselves for further political volatility, or even another stock market crash.

Also, there’s no dividend for now. However, the risk seems to be reflected in today’s price. It still looks a strong long-term buy-and-hold at today’s entry price.

Stock market crash opportunity

Standard Chartered is only the second fastest rising share price on the FTSE 100 today. Associated British Foods (LSE: ABF) is up more than 8%. The Primark owner has inevitably been hit hard by the lockdown but, as the government relaxes rules, it should benefit once people get outside and want to smarten up their wardrobes.

Investors have welcomed today’s news that management aims to open all Primark stores in England by 15 June, with openings in Northern Ireland, Wales and Scotland coming later this month.

It’s currently trading from 112 stores across Europe and the US, around a third of its total selling space. Today, it reported that overseas customers are queueing to get in and “once in store, spending on larger basket sizes.”

Cash flow should improve markedly in the second half of this financial year, although management has yet to reinstate guidance. The share price is now bouncing back from the stock market crash.

The group is also renegotiating lease arrangements to cut overheads at Primark, which contributes around two thirds of the FTSE 100 group’s operating profit. The big opportunity here is that Associated British Foods shares still trade around a quarter lower than before Covid-19.

But one threat is that shoppers now reject fast fashion in favour of more sustainable options. Right now, I think the opportunity outweighs the threat.

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Down 7% to around £19! Is now the time for investors to consider this FTSE 100 banking giant’s deeply-undervalued shares?

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Have £3,000? Here are 3 stocks I’d buy for my ISA as lockdown lifts

Paul Summers — Sun, 31 May 2020 08:36:14 +0000

The market has unsurprisingly welcomed the news that lockdown restrictions are to be slowly lifted over the next few weeks. Arguably the most important detail, as far as the economy is concerned, is the re-opening of all non-essential shops by 15 June. With this in mind, here are three potentially great ISA buys that might do better than most in the new retail environment.

Cheap ISA buy?

The fact that shops are being allowed to reopen does not mean that consumers will be in the mood to spend like there’s no tomorrow, of course. They may, however, feel the need to replace some of their more comfortable ‘lockdown clothing’.

For me, this could be good news for Primark-owner Associated British Foods (LSE: ABF). Say what you like about the wares sold by this company — the fact that you can fill a wardrobe on the cheap could mean it does better than most during a recession.

Another attraction to ABF is that it isn’t solely dependent on the success of its stores — it has its fingers in the grocery, agriculture, sugar, and ingredients markets. This makes it a good ISA option for defensive-minded investors, in my opinion.

True, the shares haven’t done particularly well over the last few years, but consumers’ desire to find value for money in tough times could mark a change in direction.

If we assume that analyst predictions on earnings in FY21 are still roughly correct, the stock also changes hands at a really-rather-decent valuation of 14 times earnings.

Quality operator

My second pick of retailers would be FTSE 100 sports and casualwear firm JD Sports (LSE: JD).

Boasting excellent free cash flow and experienced management, this business looks set to go from strength to strength. Having established itself as a go-to destination for trainer lovers in the UK, it’s now targeting large overseas markets such as the US.

Is a lot of this already priced-in to the shares? Quite probably. Like many stocks, the optimum time to buy was a couple of months ago. From mid-February to mid-March, JD lost two-thirds of its value. The share price has more than doubled since.

Hindsight is a wonderful thing, of course. Nevertheless, JD is one of only a handful of FTSE 100 stocks I’d feel comfortable holding within an ISA for the very long term. And companies like this rarely stay cheap for long.

Riding high

My third and final selection is something of a wildcard: bicycle-seller and auto parts retailer Halfords (LSE: HFD).

I’ve actually been very bearish on this company in the past, partly due to its lack of an economic moat. But the coronavirus pandemic has altered my stance somewhat. In case you haven’t noticed, cycling has been hugely popular over recent months as long-distance travel has been prohibited.

To be clear, I don’t think Halfords is a ‘buy-and-forget’ stock. There’s no guarantee that those who say they now plan to ride to work rather than catch public transport will actually do so. There’s also quite a bit of debt on the balance sheet.

Even so, the next set of numbers released by the company is likely to be very good indeed. Those buying a small amount now for their tax-efficient ISA could still do well.

The post Have £3,000? Here are 3 stocks I’d buy for my ISA as lockdown lifts appeared first on The Twelfth Magpie.

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