Now may look like a bad time to buy FTSE 100 shares, but I beg to differ. Today’s turmoil offers a brilliant buying opportunity, but with three provisos.

At The Motley Fool, we never like to waste a stock market crash. Or even a dip, like the one the FTSE 100 is suffering at the moment. 

The index of top UK shares has been relatively resilient in 2022. It is down 8.09% year-to-date while the US S&P 500 has crashed 23.49%. Yet the FTSE 100’s relatively smaller drop is still throwing up lots of share buying opportunities for me.

FTSE 100 offers me great value

When an individual stock falls sharply in value, I tread carefully. Usually that’s due to a bad piece of company news, such as a profit warning, reduced dividend, or some other nasty that weighs on its prospects.

When the whole FTSE 100 falls, it’s a different matter, as good companies are sold off with the bad. Investors are fleeing risk right now, as today’s problems aren’t going away soon. Post-Covid supply shortages, war in Ukraine, and (crucially) rising interest rates are combining to destroy investor sentiment.

These problems will hit some sectors harder than others. Housebuilders such as Barratt Developments will suffer as rising mortgage rates hit demand. So will asset managers such as Schroders, as markets go haywire. Supermarkets like Sainsbury’s are also suffering, as customers buy less or trade down.

By contrast, luxury goods maker Burberry Group is on safer ground as the wealthy are less affected by the cost-of-living crisis. So is spirits maker Diageo, as its customers need a stiff drink right now.

I’m focusing my attention on companies that have been hit hardest, as their share prices have fallen most. They offer a tempting combo of dirt-cheap valuations and astonishing yields. I’ve just taken a punt on housebuilder Persimmon. I’m worried I may regret this, but found its 19.49% yield and valuation of just 4.81 times earnings too ridiculous to resist.

I’m now caught between buying Tesco for long-term income and growth, or investing in Rolls-Royce shares in the hope they will lead the charge when markets recover.

Three ways I reduce risk

The big risk is that markets could fall further from here, but I’m happy to take that chance for three reasons. First, it’s impossible to buy right at the bottom of the market. Today’s lower prices are good enough for me.

Second, I’m building a balanced portfolio of FTSE 100 stocks on top of that, to turbo-charge my growth. I aim to hold at least a dozen, so if one or two fail to deliver, hopefully the others should more than compensate.

Finally, and most important, I’m only buying shares that I plan to hold for the long term. That means at least 20 years, which should give plenty of time for the FTSE 100 to rebound from its current troubles.

Sometimes I have to steel myself to click the ‘buy’ button but if I wait until after the FTSE 100 has recovered, then the same stocks should cost a lot more than they do today.

The post I don’t care if FTSE 100 shares fall further, I’m buying them today appeared first on The Twelfth Magpie.

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Harvey Jones doesn't hold any of the shares mentioned in this article. The Motley Fool UK has recommended Burberry, Diageo, Schroders (Non-Voting) 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.

July’s UK consumer price index (CPI) came in hotter than expected at 10.1%. This is a 40-year high and has the potential to drive share prices further down as consumers struggle with a cost of living crisis. So, here are five shares I’m considering buying.

Lloyds

As the UK’s biggest lender, I believe Lloyds (LSE: LLOY) shares are a sound choice for my portfolio. It earns its money from the difference in providing and earning interest from loans. This is otherwise known as net interest income.

Interest rates are expected to go as high as 3% by 2024 as the Bank of England tries to combat inflation. As a result, the high street bank should get a top-line boost from higher lending costs, while benefiting from lower interest paid to customers. With enough cash to set aside for bad loan provisions, Lloyds doesn’t need to increase its savings rate to bring in more cash, thus allowing it to increase its profits. This was evident in the company’s latest half-year results, which saw it recording excellent numbers.

It’s worth noting, however, that the majority of its income stems from mortgages. With house prices and mortgage approvals starting to decline, it remains a possibility that Lloyds’ revenue could be impacted. Nonetheless, analysts think that the increase in rates should offset any declines for the time being. In fact, Lloyds stock is rated a buy as its dividend is also expected to increase. It has an average price target of 64.33p, or a 40% upside.

SSE

Energy prices have been the main culprit behind sky-high inflation. That’s because energy prices are at their highest levels since 2009. As such, I think SSE (LSE: SSE) is a share to buy for my portfolio given the circumstances.

When wholesale energy prices go up, energy suppliers increases their rates to cover the extra costs. This has allowed companies like SSE to benefit, with its top and bottom lines seeing modest increases. As a matter of fact, its profit and loss account saw its best numbers in FY22, which is why its shares are up 9% this year.

The latest inflation report shows that energy prices rose 3% on a month-on-month basis. And with a higher price cap expected in October, SSE should benefit from this. After all, its latest trading update indicates that it expects adjusted earnings per share (EPS) of at least £1.20 for FY23. This would bring its EPS to its highest level in five years.

Additionally, its dividend yield of 4.7% is rather modest and is expected to rise given its most recent increase in payout, from 25.5p to 60.2p. SSE shares are rated a moderate buy with an average price target of £20.78.

Unilever

Next on my list is Unilever (LSE: ULVR). Its share price has been rather volatile this year. Nevertheless, it has recovered by 5% since its reported its H1 numbers. Its shares are now only down by 1% on a year-to-date basis.

The fast-moving consumer goods conglomerate produces beauty products and personal care, foods and cleaning agents. Its brands include Lynx, Ben & Jerry’s, Dove, and many more. These are household names and have tremendous pricing power, given the inelastic demand surrounding most of its products. This is strongly reflected in the revised outlook given by CEO Alan Jope, when he improved the firm’s guidance.

Our guidance for underlying sales growth in 2022 was previously at the top end of a range of 4.5% to 6.5%. We now expect underlying sales growth to be above that range, driven by price with some further pressure on volume.

Unilever CEO Alan Jope

Nevertheless, it should be noted that Unilever shares are more of a defensive play to protect from potential downside at the moment. Analysts are forecasting an average price target of £40.81, which only means a potential 3% gain if I were to buy shares now.

Burberry

Burberry (LSE: BRBY) shares are a good inflation hedge, in my opinion. The brand’s status as a luxury retailer allows it to pass on many of its costs to consumers given the nature of its target market. This was confirmed by CFO Julie Brown in its Q1 trading update, with a positive outlook for the company.

The FTSE 100 retailer has benefited from the return of global travel, with a substantial amount of its sales coming from tourists. It saw its like-for-like sales numbers grow by 1% on an annual basis, despite lockdowns in key revenue driver, China. Excluding China, sales figures were actually rather impressive. They were 16% higher in Q1 overall, with EMEIA boasting impressive 47% growth. Moreover, the company’s most profitable products (leather goods and outerwear) also saw double-digit growth.

That being said, I should point out that China remains the firm’s achilles heel for the moment. With its government sticking to its zero-Covid policy, I don’t expect sales figures from that region to see an uptick any time soon. This is why its average price target currently sits at £19.34. Therefore, this is more of a long-term investment with a higher upside once China’s retail sales fully recovers.

Tesco

Last on my shopping list are Tesco shares (LSE: TSCO). Given that its core products are consumer staples, I’m expecting Tesco shares to be robust in a recessionary environment. It’s also been steadily increasing its dividend payouts, which should serve as an added benefit.

As the market leader in the UK supermarket sector with more than a quarter of the market share, I think Tesco will be able to outperform its peers. Its Aldi price match across hundreds of items has been a success so far. According to the last several Kantar grocery reports, the supermarket leader has seen its market share remain relatively robust. It has also managed to outperform most if its competitors with higher sales figures. And its Q1 trading update showed its strength in the industry.

Having said that, sales figures are expected to come in slightly lower for the year. The grocer no longer enjoys the tailwinds of the pandemic and faces slower sales as a result of high inflation. Even so, I still think Tesco can utilise its strong supply chain and relationship with customers to match last year’s stellar performance. Analysts seem to share the same sentiment, rating Tesco shares a strong buy with an average price rating of £3.19.

The post Inflation hits 10.1%! 5 shares to buy now! appeared first on The Twelfth Magpie.

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John Choong has positions in Burberry. The Motley Fool UK has recommended Burberry, Lloyds Banking Group, Tesco, and Unilever. 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.

Growth wearing off?

That’s what one might think when looking at the headline numbers from Burberry’s most recent trading update. Comparable store sales were flat with a measly 5% revenue growth on a year-on-year (Y/Y) basis. To make things gloomier, sales in the US and China declined 4% and 35% respectively.

However, these figures start to look a little less negative when taking a number of more important factors into consideration. For one, the decline in American sales were due to tough comparisons from the year before, as the continent lifted lockdown restrictions. On a three-year basis, sales are actually up by 62%! As for China, sales were heavily impacted by lockdowns.

Excluding China, sales figures were actually rather impressive. They were 16% higher in Q1 on an annualised basis, with EMEIA showing an impressive 47% growth. Additionally, the company’s most profitable line of products (leather goods and outerwear) saw double-digit growth. This was helped by its partnership with Bimba Y Lola, which contributed to 21% growth in leather goods, excluding China. Moreover, continued investments in digitalisation and AR technology saw new Burberry products and collections reflect strong performances.

Profits are well coated

Despite a substandard Q1 report, management still expects a positive FY23. CFO Julie Brown mentioned that the FTSE 100 firm expects high single-digit revenue growth. She also expects the designer to achieve an operating profit of 20% through to FY24. While gross margins are forecasted to come in lower in H1, she anticipates this to be higher in H2, as a general move towards higher priced items should help margins.

In addition, a 5% increase in operating expenses should remain steady for the time being. This is due to Burberry’s long-term lease agreements protecting it from higher rental costs. As such, Burberry will still have sufficient levels of cash to expand its business with an estimated capital expenditure of £170m to £180m. Therefore, the British firm is on track to delivery 65 newly designed stores by the of its financial year, with its sales outlook remaining unchanged.

Love is in the air

Keeping everything in mind, is this an opportune time to buy Burberry shares then? Well, management is still confident for growth in sales and revenue in the medium and long term. As China stores reopen, I’m anticipating a huge recovery in sales figures in the second half of the year, provided no further lockdowns occur. Chinese Valentine’s Day is also coming up, with Singles Day around the corner as well. Hundreds of billions of dollars are spent on occasions like these, and if Burberry can capitalise on this, it should see its sales figures soar.

Having said all that, I think this is a good time to buy Burberry shares for my portfolio. The company’s business seems to be ‘inflation-proof’ as it’s been able to pass on higher costs to consumers with no resistance. And as the Chinese population becomes increasingly affluent, an increase in luxury good spending should benefit Burberry shares for years to come.

The post Is now the perfect time to buy Burberry shares? appeared first on The Twelfth Magpie.

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John Choong owns of Burberry. The Motley Fool UK has recommended Burberry. 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.

Burberry on discount?

There are multiple reasons behind the Burberry share price fall — rocketing inflation, low consumer confidence, fears of an impending recession, you name it. However, one economic metric that stands out is retail sector weakness. Retail sales figures coming out of China have been dismal.

Burberry receives the bulk of its revenue from Asia, and more specifically, China is a key market. As such, lockdowns there have impacted consumer spending substantially. As a result, the country’s retail sales figures have seen a steep decline. For context, China’s retail sales were 11.1% down year on year in April, and down 6.7% in May. Burberry said that Chinese sales accounted for 30% of its turnover last year, but were down 13% in Q4.

Making matters worse, that other key Asian market, South Korea has seen its retail figures decline on a month on month basis since January. Nevertheless, there could be a glimmer of hope for Burberry. As China’s major cities come out of lockdown, I expect sales to start rebounding.

Luxury perks

Do Burberry shares come with good income? Well, the stock goes ex-dividend on 30 June so if I buy it after that, I won’t get the latest dividend payout. But it’s planning a final payout of 35.4p per share, giving it a 2.8% dividend yield. While this isn’t the highest in the FTSE 100 index, the yield still outperforms the luxury industry’s average of 1.7%. Taking these factors into account, I think it’s a reasonable percentage.

Diamonds are created under pressure

Burberry shareholders felt the pressure when its share price dropped as low as £14.80 in May, but that pressure may be about to reverse. The stock has seen a steady recovery since then, and could be on track to head into the green, as retail sales in China are expected to recover sharply in the coming months.

Furthermore, the firm is expected to benefit from travel tailwinds. This is because it generates a substantial amount of revenue from airport stores and tourists shopping in destination cities. Having said that, Burberry will be reporting its Q1 results in around two weeks’ time. I’m not expecting strong figures given the lockdowns in China and poor retail sales data coming out of South Korea.

But like many investors, I’ll be paying close attention to guidance provided by management. A downward revision of its expected earnings for the year could send the share price lower. In that scenario, I’ll be looking to buy some shares. After all, the company has a healthy balance sheet with high-quality earnings margins. Therefore, I think it’s a matter of when, not if, Burberry shares will return to previous highs above £23.

The post Should I buy Burberry shares in July? appeared first on The Twelfth Magpie.

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• This FTSE 100 share pays no dividends. Could that change?

John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry. 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.

Burberry

Burberry (LSE: BRBY) is a British luxury fashion house. The brand designs and distributes ready-to-wear items. These include leather goods, footwear, and fashion accessories. This week, a director sold thousands of Burberry shares, but they were also awarded from a huge chunk of free shares as part of their compensation.

• Name: Jonathan Akeroyd
• Position of director: Chief Executive Officer
• Nature of transaction: Free shares
• Date of transaction: 15 June 2022
• Amount purchased: 71,106 @ nil
• Total value: £N/A

• Name: Jonathan Akeroyd
• Position of director: Chief Executive Officer
• Nature of transaction: Sale to cover tax liabilities
• Date of transaction: 15 June 2022
• Amount sold: 34,395 @ £16.18
• Total value: £556,399.73

Greggs

Greggs (LSE: GRG) is a British bakery chain. It specialises in savoury products. Among these are bakes, sandwiches, sweet items, and its famous sausage rolls. This week, a non-executive director purchased a thousand Greggs shares.

• Name: Lynne Weedall
• Position of director: Non Executive Director
• Nature of transaction: Purchase of Shares
• Date of transaction: 16 June 2022
• Amount purchased: 1,000 @ £19.01
• Total value: £19,007.20

Deliveroo

Deliveroo (LSE: ROO) is a British online food delivery company. It operates in over 200 locations across the UK and internationally. In the UK, it is the second biggest food delivery platform behind Just Eat. A huge director dealing occurred over at Deliveroo this week. Tens of thousands of Deliveroo shares were traded.

• Name: Adam Miller
• Position of director: Chief Financial Officer
• Nature of transaction: Free shares
• Date of transaction: 15 June 2022
• Amount purchased: 83,200 @ £0.81
• Total value: £67,392.00

• Name: Adam Miller
• Position of director: Chief Financial Officer
• Nature of transaction: Sale to cover tax liabilities
• Date of transaction: 15 June 2022
• Amount sold: 40,314 @ £0.81
• Total value: £32,654.34

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this instance, the director dealings at Burberry and Deliveroo were free shares. These are a form of restrictive stock units (RSU). RSUs are a form of stock compensation. It is a promise from the company to award a company’s shares in the future.

For Burberry’s CEO, these shares are yet to be cashed in. As such, they hold nil value. But for Deliveroo’s CFO, shares were awarded at the stock’s market price at that time. This means that he decided to cash in his awarded shares.

The post Director dealings: Burberry, Greggs, Deliveroo appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended Burberry, Deliveroo Holdings Plc, and Just Eat Takeaway.com N.V. 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.

April’s consumer price index has inflation pointing at 9%. With the FTSE 100 largely unmoved this year, not many of the index’s shares have managed to outperform the stock market. That being said, although 5% down this year, Burberry (LSE: BRBY) shares could be a potential hedge against inflation.

Luxurious inflation

The moat of luxury brands is their ability to thrive in high inflation environments. This is due to their inelastic demand and ability to pass on costs to customers. Higher prices are perceived as a status symbol, rather than a weight on the consumer’s wallet.

Burberry’s recent expansion in China shows how important diversification is in building a moat. While its European and Middle Eastern sales suffered last year from high inflation and Covid travel restrictions, its Chinese sales performed exceptionally well. Low inflation paired with an ever increasing number of consumer spending on luxury goods in China certainly helped the firm’s top line.

The yuan makes cents

The result of Burberry’s rapid expansion in China reflects in its income statement, as China is the company’s main revenue driver — Burberry has opened 224 stores in Asia Pacific. China’s increasingly affluent population is taking a bigger share in the world’s luxury market. In fact, the share of Chinese luxury consumer spending is now 21% of the global market, up from 11% just two years ago.

On the flip side though, China’s zero-Covid policy has resulted in several city-wide lockdowns. This has made growth volatile. Chinese sales figures were affected in Q4, with further impacts expected in this year’s first half.

Nonetheless, Burberry still posted positive results for the year. Despite the slowdown in China, both the firm’s top and bottom lines exceeded expectations. Additionally, Burberry gave a rather upbeat outlook for the year ahead. It expects revenue to grow at high single-digits, albeit with uncertainty surrounding China’s lockdowns. However, as China awakes from its lockdowns, I’m expecting the Burberry share price to recover and outperform the current inflation rate.

Long runway

Even though Burberry had a stellar year, I’m still wary of potential future lockdowns that could affect its share price. In spite of that, the retailer has shown its ability to outperform without the support of the Chinese market, as Burberry’s continued investment in digital channels has been vital to its success during Covid. I believe that Burberry has got a long runway of growth ahead with plenty of tailwinds for several reasons.

1. China is gradually lifting its lockdowns.
2. Travel is starting ramp up globally. As the brand generates a substantial amount of sales from tourists, this should help its top line.
3. The Supreme and Lola partnerships continue to attract more customers.
4. It introduced 47 new stores in FY 2022 with new concepts, and a further 65 planned for FY 2023.

Given these factors, I’m confident that the FTSE 100 share could turn green very soon. A modest price-to-earnings ratio of 17 and a decent dividend yield of 2.7% makes this stock a lucrative buy for me. As such, I’ll be looking to buy Burberry shares for my portfolio to hedge against inflation.

The post Can this FTSE 100 share hedge against inflation? appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended Burberry. 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 following two household name UK shares have just delivered updates suggesting they are over the worst of this year’s troubles. I’m tempted to add both to my portfolio.

I’m watching the Burberry share price

In my search for UK shares, FTSE 100 luxury fashion group Burberry Group (LSE: BRBY) has long been high on my watchlist. It’s usually expensive though, trading at around 25 times earnings, typically.

Today, Burberry posted a painful 30% drop in half-year revenue to £878m. Operating profit for the six months to 26 September fell by three quarters from £203m to £51m. That’s Covid for you. The good news is that business was brisk in the second quarter as stores reopened, although that could reverse now due to lockdown 2.0.

Q2 sales grew by double-digits in mainland China, Korea and the US. The drop in tourism hit Europe, the Middle East and Japan. 

Burberry’s shares have jumped more than 4% as investors welcomed signs that it is attracting new, younger customers. I think Burberry now looks better placed than many UK shares when the pandemic recedes. It is relatively cheap by its standards, trading just over 20 times earnings. For most UK shares, that would be expensive. Not for Burberry though, and I’d buy it for the long term.

UK shares like ITV give me hope

Broadcaster ITV (LSE: ITV) fell out of the FTSE 100 in September as advertising revenues and studio activity slumped in the pandemic. The ITV share price recovered quickly after the first lockdown, rising almost 50%, but is down two-thirds measured over five years. As with many UK shares, the pandemic is hiding long-term challenges.

In today’s Q3 update, the Love Island and I’m A Celebrity broadcaster reported a 16% drop in revenue over nine months to £2.17bn. However, it said Q4 advertising revenues should rise slightly year-on-year, while 85% of paused productions are back on track or have been delivered.

Broadcast revenue fell 13% to £1.27bn with production income down 19% to £902m. On the plus side, ITV’s total viewing was up 2%.

The pandemic has been a mixed bag bag for ITV, as with many UK shares. Locked-down viewers are hungry for content, but ITV Studios has struggled to produce content because of coronavirus restrictions. Lockdown 2.0 isn’t helping. ITV faces tough competition though, as it is competing with the likes of Netflix for eyeballs. Its BBC joint venture Britbox could drive much-needed international sales, assuming there is a global market for our domestic TV.

ITV is one of many cheap UK shares on the market, trading at 6.45 times earnings. I’d consider buying both today, but I’d plump for Burberry first, despite its luxury price.

The post Stock market melt-up! I’d buy these 2 UK shares for the next stage of the recovery appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry and ITV. 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.

Top UK fund manager Nick Train admires companies that take a long-term perspective when investing in their own business. Here are three FTSE 100 stocks he says are feeling sufficiently robust to add acquisitions to their business, despite the pandemic. The stock market crash gives you an opportunity to buy them at a discounted price.

In the right spirit

Train admires the move by spirits giant Diageo (LSE: DGE) to buy Aviation American Gin, part-owned and endorsed by celebrity Ryan Reynolds, for a potential $610m. He sees the purchase as a reassuring sign the group’s balance sheet and liquidity are in good shape, despite the stock market crash.

He says the US gin brand has seen “exponential growth” and Diageo is paying 20 times sales to take the brand to another level. It echoes Diageo’s successful $1bn acquisition of George Clooney-sponsored super-premium tequila brand Casamigos in 2017. Train said that deal “looks smarter and smarter as the US spirits boom continues, with premium brands leading the way.”

The Diageo share price is still trading 20% lower than before the stock market crash. I’m a long-term fan who’d buy today.

Scientific, technical and medical publisher and exhibitions company RELX (LSE: RELX) is another Train favourite that’s been on the acquisition trail. In August, it snapped up Cambridge-based privately held company pharmaceutical software company SciBite, for a rumoured £65m.

RELX has now spent around £800m in 2020, and Train speculates its purchases could one day be worth billions. The stock market crash has also punished the RELX share price, which is down 20% from its January peaks, giving a buying opportunity.

Another stock market crash buy

Finally, Train applauds luxury fashion house Burberry Group (LSE: BRBY) for pushing ahead with its new joint venture store in Shenzhen with Chinese tech giant Tencent. This aims to be a radical new interactive shopping experience for the digital age.

He admires the stock for having strong “brand resonance” in the East, where retail and luxury innovation is now outpacing the West.

The Burberry share price is down to around 30% this year. Train compares this slump to a similar stock in his portfolio, Prada, whose share price has largely shrugged off the stock market crash. Brexit may be one factor. “Apparently global investors have an aversion to the UK stock market, but this is, in some cases, getting ridiculous,” he says.

You can find cheaper shares but these still look like bargains. Burberry trades at just under 20 times earnings, but that’s cheap by its standards. Diageo and RELX are yours for around 22 times earnings, cheap by theirs.

If want to buy FTSE 100 companies looking beyond this year’s stock market crash and pandemic turmoil, Diageo, RELX and Burberry could be a great place to start. 

The post Stock market crash bargains! I’d follow Nick Train and buy these 3 FTSE 100 stocks appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry, Diageo, and RELX. 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.

Fashion leader

The Burberry share price is up 27% over the past 12 months alone, thrashing the index, up 10% over the same period. The £8.89bn London-fashion house has global reach, led by a fast-growing operation in China, while its wealthy/aspirational customers have largely avoided the recent squeeze on incomes.

The stock is down 3.5% today, as its Q3 trading update showed retail revenue rising just 1% to £719m. Yet the report was largely positive, as CEO Marco Gobbetti reported “another good quarter as new collections delivered strong growth and we continued to shift consumer perceptions of our brand.” Perhaps markets were worried by his comment about being “mindful of the uncertain macro-economic environment,” but that’s a usual caveat to its more recent trading statements and, these days, who isn’t?

Burberry has driven its brand through careful use of social media and recently announced a partnership with tech giant Tencent in mainland China, with the first “social retail store” to open in Shenzhen next year.

Mainland China growth is still in the mid-teens, although political unrest halved sales in Hong Kong. Elsewhere, growth was largely in the low single digits, including the US, although tourists to continental Europe were spending more freely.

More growth to come

Burberry hiked its revenue projections for full-year 2020 slightly, from “broadly stable” to “a low single digit percentage.” I suspect markets expected more today, given that it now trades at 24.2 times earnings. There’s nothing new there as it’s been pricey for some time.

The forecast yield of 2% below the FTSE 100 average of 4.34% is covered twice by earnings, which gives scope for growth. City analysts are pencilling in earnings growth of 10% in 2021, and an even more impressive 13% the year after. Burberry still looks a buy. Alternatively, you could wait for a market dip and a cheaper valuation.

Marks & Spencer still struggles

I wish I could be so positive about another company that was once a big name in fashion, Marks & Spencer Group (LSE: MKS). Its decline has been dramatic, as its flourishing food stores were held back by a clothing operation that doesn’t seem to understand its customers, or how to cater for them. It even struggles to sell clothes online.

Last year, it crashed out of the FTSE 100, and the Marks & Spencer share price continues to slide, losing a third of its value in the last year alone.

As well as its own issues, management has also had to cope with the wider decline of the high street, a trend that looks unlikely to reverse. The £3.6bn FTSE 250 group is cheap, trading at just 10.4 times forward earnings, and comes with a generous forecast yield of 5.7%, covered 1.7 times by earnings.

Management is looking to boost food sales by selling online through Ocado, but still has to work out what to do with its clothing and home operations. I’d rather buy Burberry.

The post £1k to invest? I’d buy this FTSE 100 growth stock, but shun this FTSE 250 faller appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry. 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.

Putting on the style

The £9bn FTSE 100 company also delivered an 11% rise in interim pre-tax profits to £193m, while retail comparable store sales rose 4%. New collections delivered double-digit growth, although this was knocked by a softer performance of replenishment product lines.

This is nonetheless an impressive performance, and investors are rushing to buy into the Burberry share price as a result.

Mainland China led the way with growth in the “mid-teens”, where it has just announced a social retail partnership with tech giant Tencent. Growth was mid-single digit percentage for Asia Pacific as a whole, despite a double-digit drop in Hong Kong. Solid growth in the UK and Europe offset slower growth in the Americas and a dip in the Middle East.

The right balance

Hong Kong notwithstanding, Burberry is in a good place right now, boasting healthy operating margins at 16.3% and a strong return on capital employed, currently 32.7%. It also has a healthy balance sheet, with net cash standing at £670m in September, up slightly from £647m last year, despite returning £129m to shareholders as dividends and £15m via share buybacks.

Today, it announced a 3% hike in the interim dividend to 11.3p. The forward yield is just 2.2%, against an average of 4.53% for the FTSE 100 as a whole, although it’s covered twice by earnings, giving it plenty of scope for future progression.

So would I buy into the Burberry share price today? I’m a little deterred by its pricey valuation of 23.2 times forward earnings. On the other hand, today’s results would have been even better without the “considerable disruption” in Hong Kong, and the outlook looks solid. I’d label it a buy.

Macro misery

Distribution and outsourcing group Bunzl (LSE: BNZL) has long been a FTSE 100 favourite of mine, but the past year has been a disappointment, with the share price falling 13%. 

Last month’s market update reported 4% growth in Q3 revenue, but underlying revenues fell 1%, due to previously-announced lower sales to a large grocery customer in North America. The group reaffirmed full-year expectations against “continued mixed macroeconomic and market conditions” in its main countries and sectors.

Bunzl nonetheless remains an impressive long-term income and growth play, delivering an average total return of 13.8% a year over the past decade, with 26 consecutive years of dividend hikes. It has grown through acquisition, and has already spent another £100m this year, with further takeover discussions ongoing.

Contrarian buy

As an international business-to-business group, the Bunzl share price is inevitably vulnerable to a slowdown in the global economy. But it also has plenty of resilience, as well as high cash conversion and solid dividend growth. The forecast yield is 2.5%, covered 2.5 times, lower than the FTSE 100 average but with a great track record of growth.

A forward valuation of 16.3 times earnings is relatively low for this £6.87bn group. So instead of being deterred by recent weakness, you might view this as an opportunity to snap up a strong long-term buy and hold at a moment of weakness.

The post I’d buy the soaring Burberry share price and this FTSE 100 dividend stock today appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry. 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.