The FTSE 100 has made a strong move forward, jumping nearly 4% in a week. Since the second week of October, the Footsie has gone up a whopping 7.4%. This strong month of trading is the trend reversal I have been looking for before looking for bargains. Right now, some blue-chip FTSE 100 shares look very cheap and ready for liftoff. Here are two names from my watchlist that look ripe for picking before 2023. 

Dirt-cheap energy share

SSE (LSE:SSE) is an energy company that operates wind farms and hydroelectricity units. It has become a key part of the UK’s push to make renewable energy more affordable and accessible. 

The energy industry has undergone a drastic shift over the last two years. Oil prices have remained close to the $100-mark throughout 2022. This has increased the demand for renewables and I am keen on investing in an FTSE 100 green energy share.

SSE has been growing its wind energy reserves recently. In the first quarter (Q1) of 2022, the company was 5% ahead of energy generation targets. Compared to Q1 2021, output increased by 24% year on year.

SSE also expects adjusted earnings per share of at least 120p this year factoring in expenditures and investments in excess of £2.5bn. This shows me that the company is healthy financially despite sizable acquisitions.

SSE shares are currently trading at 1,592p at a price-to-earnings (P/E) ratio of just 6.6 times. The FTSE 100 stock also comes with a sizable dividend yield of 5.3% making it a growth option for my portfolio that also offers a lot of value. 

The energy sector is expected to undergo a major shake-up given skyrocketing profits. The recently announced de-facto windfall tax on renewables will cut earnings significantly.  But this is not a permanent move. 

While revenue will drop momentarily, the industry will continue to gain prominence. I think this is the best period for me to invest in renewable energy in the UK. Once the taxes are lifted, earnings will grow, attracting more investor interest. And I am looking to capitalise before this happens. 

Telecom giant with growth potential

Airtel Africa (LSE:AAF) shares have been on my watchlist for a while. Owned by Indian giant Bharati Airtel, this FTSE 100 company offers mobile connectivity and digital payment software in 14 major countries across Africa. 

In fact, Africa is a global leader in digital payments and Airtel Money offers comprehensive digital fund transfer solutions, empowering low-income communities. The company is growing its offering by securing more 4G licences and is well positioned to be a 5G giant in the continent. 

Despite a 20% jump in earnings this year, its shares are down 13% this year. It is trading at a P/E ratio of 8.1 times with a dividend yield of 3.6%. To put this context, Airtel Africa shares are up over 240% since the first pandemic crash.

Expansion and the switch to 5G will prove to be cash-intensive. This could drop earnings over the coming months and years depending on when frequency bands are offered to private firms. 

However, I am bullish on the firm’s tested business model and steady recent revenue growth. It currently looks attractive but I am waiting to see price action towards the end of the year before making an investment. 

The post FTSE 100 recovery: 2 cheap shares I’d buy on their way up  appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Airtel Africa Plc. 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 has just made a comeback to 7,000 levels, but the recent crash has left me with some incredible bargains. And I’m looking to capitalise on this drop before the market rebounds fully.

The global business environment has changed considerably since 2020. While some previously prominent industries are looking at a decade of laboured recovery, several new and exciting areas have emerged. 

I’m looking for a firm operating in a growing sector with a global footprint, stable business model and steady growth. And only one share from my FTSE 100 watchlist looks like a solid option to me. 

A big FTSE 100 bet? 

Flutter Entertainment (LSE: FLTR) is a sports betting and online gambling company that operates famous brands like Sky Betting & Gaming, PokerStars and Sportsbet. The firm was formed by merging two British giants — Paddy Power and Betfair.

After recently released first-quarter results, its share price has jumped over 42%. Here’s why I’m still considering an investment at its higher price. 

During the pandemic, there was a boom in online betting activity. In the US, the monthly average sports betting amount across the country was $310m. Across 2021, the value was estimated at over $7bn a month. This 20x increase was because several states in the US legalised sports betting after 2018.

Another big factor has been the rise of mobile payments. In fact, mobile sports betting account for 84% of all transactions in the region. 

Flutter Entertainment benefited as a result. In 2021, group revenue grew 37% to £6.03bn. Across its brands, average monthly players exceeded 7m for the first time. The FTSE 100 firm also acquired several smaller betting brands across the globe.

The UK and Ireland remain Flutter’s biggest markets, accounting for 33% of total revenue. While mobile phone betting figures are lower here, offline stores still receive a lot of foot traffic. And Flutter Entertainment remains the biggest betting firm in the region. 

My concerns

There’s no doubt that online sports betting and gambling are fast-growing industries. But this also raises a few ethical concerns, especially online. The age checks are fragile on some newer websites, leading to higher instances of minors gambling. This has led to calls for tighter regulations worldwide, including an upcoming Gambling Act Review White Paper from the UK government. This could cut revenue through taxation overnight, which poses a risk.

In fact, Flutter Entertainment’s online revenue for Q1 2022 dropped 20% year on year as the company launched changes to make gambling safer. While this was offset by a 45% jump in overall revenue from the US, it’s a sign that even big FTSE 100 companies in this highly regulated sector can suffer from new regulations. 

However, I’m still bullish on this company given the popularity and global appeal of its brands. It’s already an established powerhouse in the growing US market. Its primary strategy now is to grow its player base in the region while also focusing on high-volume markets like India, Brazil and Australia.

The industry is expected to be valued at $140bn by 2028. And I expect Flutter Entertainment to play a vital role in this growth. This is why I’m considering an investment in it if the upcoming full-year results are favourable. 

The post Up 42% in 3 months! This is the only FTSE 100 stock I’d buy now appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

But it isn’t all gloomy skies. The Office of National Statistics found that the UK economy grew by 0.2% in the second quarter of 2022, dispelling fears of a recession. 

I think quality FTSE 100 shares are still the best option for my growth portfolio. Looking at the charts, top UK shares have been rather elastic, rising strongly after recent crashes. While there is no guarantee that this will happen again, investing during mini crashes has historically been a great way to buy/add growth stocks. This is why I think it is the perfect time to invest in two FTSE 100 shares from my watchlist. 

Pandemic superstars 

Croda International (LSE:CRDA) and Ashtead Group (LSE:AHT) are two companies that I have been tracking closely since the pandemic. Between March 2020 and November 2021, these two FTSE 100 shares went up 152% and 342% respectively.

But since then, market corrections have put these top performers in bargain territory.

Industrial equipment rental firm Ashtead is down 34% since its all-time high and is currently trading at 4,000p, at a price-to-earnings (P/E) ratio of 14.6 times.

Across the financial year (FY) 2022, a period when most businesses struggled with inflation, Ashtead’s revenue jumped nearly 20% to £7.96bn, while net income grew of 36% to £1.25bn. In fact, Ashtead’s revenue has increased every year since 2018.

The company has a strong presence in the US, UK, and Canada, trading under the name Sunbelt Rentals. Its industry was recently boosted by US President Joe Biden’s public works stimulus bill. As a result, rental revenue from the US jumped 29% in the first quarter of FY2023. 

Similarly, chemical giant Croda has fallen 38% since its all-time high in November 2021. It is currently trading at 6,370p at a P/E ratio of 12.5 times. 

In FY2021 (ended 31 December 2021), Croda’s revenue jumped 35.9% to £1.89bn with net income growth of 59% to £320.8m. The company has also seen significant growth across the first half (H1) of 2022. Sales rose 21% compared to the same period in 2021. 

The British manufacturer is currently transitioning into a life sciences business, with a focus on cosmetics and pharmaceuticals. The board expects this to streamline the business with stronger margins and higher returns. 

Concerns and verdict

Both businesses have a global presence and the falling pound could affect profits moving forward. Given the volatility in global markets, this could cause these FTSE 100 shares to fall further. 

Also, a recession in the US could halt development projects, causing Ashtead’s sales to drop. Croda is still seeing proceeds from its Covid test kit chemicals, which is expected to slow down completely moving forward.

Despite these concerns, I think both businesses are well placed to navigate choppy waters. These businesses have demonstrated significant growth in recent times and have established strong markets and steady sales. Given the balance sheets, these FTSE 100 shares look dirt-cheap to me at current levels.

The post 2 beaten-down FTSE 100 shares I’d buy before the market recovers appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Croda International. 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.

FTSE 100 shares in the energy sector have witnessed a huge surge in profits over 12 months. Like many investors, I am looking at shares in the industry that could supercharge my portfolio. While there are several good stocks on offer, I have identified two showing explosive growth potential over the next decade.

But first, why are renewable energy shares witnessing historic levels of interest right now? I think the COP 26 summit last year triggered the perfect storm for a transition to cleaner energy. While governments increased focus on green alternatives, crude oil prices rose after Russia’s invasion of Ukraine. This added fuel to the green energy lobby and countries are now scrambling to secure sustainable alternatives to meet the power demand.

With money pouring into Europe’s thriving energy sector, I think this is the perfect time to invest.

FTSE 100 shares I’d buy to capitalise

The first company on my list is SSE (LSE:SSE). The FTSE 100 giant has the largest renewable electricity portfolio in the UK and Ireland. It specialises in onshore and offshore wind as well as hydropower. The company sells and distributes its energy to UK’s power grid.

In the financial year (FY) 2021, SSE generated £6.83bn in revenue and a total income of £2.28bn. These figures jumped significantly in FY 2022 when the company generated a revenue of £8.61bn and recorded an income of £3bn. The 33% jump in income comes primarily from its renewables wing.

Thanks to this strong showing, the FTSE 100 share has gone up 15.4% in the last six months. And despite this jump, it is still trading at a price-to-earnings ratio of 7.7 times. SSE shares also come with a healthy 4.6% yield making it really cheap right now

The other company on my watchlist is Centrica (LSE:CNA), a power transmission and delivery company with 11.7 gigawatts (GW) of renewable power under management.

Centrica operates British Gas, which powers millions of homes in the country. Centrica has been adding services like installing EV chargers to help consumers hit net-zero emissions as well. The company also owns a 20% stake in UK’s nuclear energy bank which is considered one of the cleanest sources of energy today.

The FTSE 100 share saw its dividend reinstated last month after the company saw revenue jump a whopping 2,851.22% in 2021 to £1.21bn. Although this is in comparison to a terrible 2020, the bounce back is significant. The energy giant also presented a stronger balance sheet, repaying the £93m debt from 2021.

Concerns and verdict

While both companies look financially strong right now, it is worth noting that energy prices play a major role here. When energy prices stabilise, profits could trend back towards pre-pandemic levels. This will slow down the investor interest in these two FTSE 100 shares.

Right now, both companies have a strong cash flow. But as we move closer to UK’s net zero ambitions, R&D budgets and asset purchases will increase, which could affect future results.

However, given the size, reach, and finances of these two companies, I think they are the best FTSE 100 energy shares for my portfolio right now. Depending on share price performance, I may be tempted to make a £1,000 investment in both in the coming months.

The post Green energy boom: 2 explosive FTSE 100 shares I’d buy to capitalise appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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 have zeroed in on two shares for my portfolio. These are businesses that I think show growth potential and can generate cash even in tough economic conditions.

Grocer with sky-high dividends

At current levels, I think the Sainsbury (LSE:SBRY) share price is one of the best bargain options in the FTSE 100 right now. AT 209p, it is trading at a price-to-earnings ratio of 7.2 times and a lofty 6.2% yield.

Yes, the company has been in the news this week after last quarter’s sales dipped 4%. But this was in line with board expectations and the profit estimate for the year remains unchanged at between £630m and £690m. While this is lower than the 2021-22 profits of £730m, the company has a few plans up its sleeve. 

Given the rising raw material costs, the board will inject £500m over the next 24 months to keep product cost inflation at the minimum. I think this move will help the grocer gain footing on Tesco and grow its current 15% market share as inflation runs rampant.

Despite small margins, if profit estimates are met, the company expects to generate retail free cash flow of at least £500m in 2022-23, similar to last year’s £503m. I think the board will keep the payouts flat next year given tough economic conditions. But a healthy 5%+ yield looks likely, which I see as a positive.

However, the impact of inflation will hit this sector hard. Large grocers like Sainsbury will lose out to discount retailers, even if current prices are maintained. And this will inevitably eat away at Sainsbury’s revenue. 

But overall, this FTSE 100 firm looks well-set to navigate choppy waters. I am bullish on Sainsbury shares and will consider them for my portfolio in 2022  if signs of a market recovery become stronger. 

Alcohol heavyweight

Diageo (LSE:DGE) is a global alcohol aggregator that owns extremely popular brands like Smirnoff and Johnnie Walker. The FTSE 100 company has adopted an emerging market strategy, focusing on growing regions like India and China.

Down 14.8%, I think the Diageo share price is going through a rare lull given its steady rise over the last five years. And looking at the share price action over the last two decades, the company has been on an incredible upward trajectory. 

And I think this growth could continue given its fast expansion policy. Diageo recently purchased Vivanda, owner of a flavour matching technology. This will allow users to build a flavour profile and choose spirits based on suggestions. I think the company is adopting digital sales and shows a lot of growth potential.

Tough regulations and local competition will grow with expansion. And the company will have to deal with the rising tide of health-conscious youth who are choosing to go alcohol-free in record numbers. 

However, I think the company is well-placed to navigate this given its size, range, and future plans. This FTSE 100 share is not a bargain on paper at 3,525p, but I think the company offers a lot of value and growth. This is why I will wait for a drop in share price before investing.

The post 2 top FTSE 100 shares to buy before a new bull market appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo and Sainsbury (J). 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.

So, what are the key differences between these index funds, and which do I prefer for 2022? Let’s explore. 

Composition: large-cap vs mid-cap stocks

The primary difference between the FTSE indices is total market capitalisation. For the FTSE 100, this currently stands at £1.97trn, eclipsing the FTSE 250’s £379bn. FTSE 100 stocks are blue-chip and large-cap companies, such as BP and Lloyds. By contrast, the FTSE 250 contains mid-cap companies, including Cineworld and easyJet. 

Mid-cap stocks tend to be more volatile than large-cap ones as some may be less dominant in their market sectors and they also may have higher growth potential. Conversely, when sentiment is bearish, investors often flock to defensive stocks with deeper cash reserves to weather a stock market crash. These companies feature more heavily in the FTSE 100. 

Both indices weight by free-float market capitalisation of their individual constituents. Currently, Shell, AstraZeneca and HSBC are the three largest FTSE 100 companies, collectively comprising over 20% of the total index. The FTSE 250 is less top heavy. Its three largest shares comprise under 4% of the total index. 

Sector focus and revenue sources

The FTSE 100 is highly concentrated in certain industry sectors, such as financial services, healthcare and energy. The FTSE 250 is more diversified in its industry focus. Additionally, roughly 70% of the revenue generated by FTSE 100 stocks comes from overseas, compared to 50% for the FTSE 250.

Accordingly, the FTSE 250 tends to be more closely linked to UK economic performance, whereas the FTSE 100 contains companies with a strong global presence. The FTSE 100 has historically had a correlation with sterling due to the falling cost of exports when the British currency weakens. The FTSE 250 is typically less exposed to movements in foreign exchange markets. 

Historic performance and dividends

The FTSE 100’s value has been almost static over the past five years, eking out a positive return of just over 0.5%. The FTSE 250 has enjoyed stronger gains of 10.5%+. Indeed, the former last reached an all-time high in May 2018, compared to September 2021 for the latter.

However, this doesn’t tell the whole story. The FTSE 100 tends to have bigger dividend-payers among its constituents, and dividends form a crucial part of an investor’s total return. Current dividend yields sit at 3.22% and 2.17% for the FTSE 100 and FTSE 250, respectively. 

Moreover, it has been a rocky start to the year for stock markets around the world, but the UK’s large-cap index has fared better so far compared to its mid-cap counterpart, declining by only 2.7% as opposed to 12.3%. 

Why I prefer the FTSE 100 for 2022  

For me, 2022 will be a year defined by tightening monetary policy, geopolitical uncertainty and stock market volatility. I’m looking to invest in resilient companies that can survive and even thrive in this turbulent macroeconomic environment. I believe the FTSE 100’s composition is better suited to perform well in the year ahead. 

Therefore, while I will continue to hold my existing positions in tracker funds for both indices, I will only be adding to my position in my FTSE 100 ETF for now. 

The post FTSE 100 vs FTSE 250: which index do I prefer for 2022? appeared first on The Twelfth Magpie.

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Charlie Carman owns shares in Lloyds and Vanguard's FTSE 100 UCITS ETF (VUKE) and FTSE 250 UCTIS ETF (VMID). The Motley Fool UK has recommended HSBC Holdings and Lloyds Banking 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.

Here, I’m going to highlight two FTSE 100 dividend stocks I see as attractive at present. I’d be happy to buy both as we begin September.

A top FTSE 100 dividend stock

One dividend stock that strikes me as a ‘buy’ right now is Smith & Nephew (LSE: SN). It’s a leading healthcare company specialising in orthopaedic implants and advanced wound management solutions. Its share price has pulled back recently and I think this has provided a great buying opportunity.

Smith & Nephew struggled during Covid-19 last year due to the fact that so many elective medical procedures had to be postponed. However, it’s now making a strong recovery. For the six-month period to 3 July, revenue was up 28%. For the full year, the group expects revenue growth of 10-13% (I think there’s a good chance it will exceed this). If revenues and profits continue to rebound, its share price should too.

Smith & Nephew isn’t the highest-yielding stock in the lead index. Currently, the prospective yield here is only around 1.8%. I still see appeal in that yield however. This is a company with an excellent long-term dividend growth track record and I expect its dividend payouts to continue rising over the long term as profits expand.

One risk to consider here is further Covid-19 setbacks. If the Delta variant results in a high level of hospitalisations, Smith & Nephew could be disrupted again.

But I’m comfortable with the risks. With the stock trading at 19 times next year’s earnings (versus 27 times for US rival Stryker), I see value here.

Attractive dividend yield

Another FTSE 100 dividend stock I like the look of right now is Unilever (LSE: ULVR). It’s a leading consumer goods giant that owns a wide range of brands such as Dove, Domestos, and Hellmann’s. Its share price has also pulled back recently (mainly due to concerns over higher input costs) and I see this as a good opportunity to build a position.

Unilever’s recent half-year results were quite solid, in my view. For the six months to 30 June, sales were up 5.4%. E-commerce sales jumped 50% while sales in the emerging markets were up 8.3%. These figures suggest to me the company’s heading in the right direction, despite the fact that inflationary pressures are impacting profits.

At present, Unilever shares offer a prospective dividend yield of around 3.7%. That yield’s very attractive, in my view. By contrast, the median forward-looking dividend yield across the FTSE 100 index is around 3.2%. It’s worth pointing out that a yield of 3.7% is quite high for Unilever.

The key risk here, in my view, is that inflation could continue to be a problem for the company. It’s worth noting that last week, analysts at JP Morgan downgraded the stock to ‘underweight’ on the back of inflation concerns.

The contrarian in me sees an opportunity here however. With the stock currently a little bit out of favour and trading on a forward-looking P/E ratio of under 19, I think it’s a good time to be buying.

The post 2 FTSE 100 dividend stocks to buy in September appeared first on The Twelfth Magpie.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Edward Sheldon owns shares of Smith & Nephew and Unilever. The Motley Fool UK has recommended Smith & Nephew 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.

As a long-term investor, the weekend is always a great chance for me to turn off and ignore market noise. It is much easier than on some volatile weekdays when I’m tempted to check up on the FTSE 100 and my portfolio for movement. 

Luckily, with the long weekend on its way, I get an extra day to reflect on my portfolio without market movement distracting me. And this weekend, I’ll be deep-diving into these two companies to see if I should buy shares. 

Diageo

Diageo (LSE: DGE) has long been one of my favourite holdings — and it’s not just because it owns Guinness. The FTSE 100 share is a strong business that owns some of the most well-known brands on the planet. In the past 12 months, Diageo’s share price has risen more than 18%, from 2,860p to 3,390p today. 

There are a number of reasons why I would consider increasing my position in Diageo. As summer rolls in, I’m getting more bullish on Diageo’s position among reopening stocks. Having taken a hit last year as Covid-19 shut restaurants and bars, it has since shown remarkable resilience. Home consumption saw first-half 2021 sales increase 0.9%, including a 10% rise in the UK. This allowed Diageo to maintain a strong £1.58bn profit year-on-year. Now, with vaccinations rolling out and the economy reopening, the company expects operating profit growth to increase by at least 14% this year. 

My biggest worry when it comes to Diageo is its rising net debt, which sits at almost £15bn as of December 2020. Should interest rates rise, it could cause the company a headache and reduce its ability to return shareholder value. 

Despite this, Diageo remains one of the strongest brands in the world. As life returns to normal and people look to have a good time, I’m thinking that there’s still a lot of potential for its share price. 

Vodafone 

I’m moving away from alcohol and over to telecommunications for my next stock pick. Vodafone Group (LSE: VOD) has been on my portfolio shortlist for years, but I’ve never taken the plunge. Despite being a top FTSE 100 income stock, I always felt it was too expensive for me. 

The leading British telecom giant has seen its share price remain flat in the past 12 months — albeit with some dips and surges in between. At 129p a year ago, now sitting at roughly 128p, there has been little to write home about. 

However, Vodafone’s share price fell 10% last week thanks to investor skittishness following its quarterly earnings report. I, for one, actually found the company’s plans quite exciting. CEO Nick Read outlined the company’s plan to invest heavily in its network amid the 5G boom. Despite this resulting in short-term cash burn, I am excited that the company is so open about self-investment. Covid-19 has accelerated global digitisation greatly, meaning demand for the pipes that run the broadband system will grow enormously. 

But that doesn’t eliminate the business’s already massive debt pile, which sat at nearly £40bn at the tail end of 2020. This will only be made more worrisome by the company’s 2.6% revenue deficit in 2020. 

However, its forward-thinking plans have got me excited, while Vodafone’s recent price drop makes it a more enticing investment opportunity for me.

The post 2 FTSE 100 stocks to consider buying this bank holiday weekend appeared first on The Twelfth Magpie.

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Jamie Adams owns shares in Diageo. The Motley Fool UK has recommended Diageo. 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.

My retirement plan is two-pronged: first, I want to invest in a high-growth stock that I can buy now and watch the gains tick over. And I also want a safe dividend-payer that can provide passive income and security.

So as I ponder that future deckchair on a porch somewhere with an iced tea in hand, I’m thinking of JD Sports Fashion (LSE: JD) and GlaxoSmithKline (LSE: GSK). 

JD Sports Fashion

My “wildcard” bet is a bit riskier than the average retirement stock. Retail is undergoing a significant shift to e-commerce and competition is fierce. However, JD Sports’ share price has soared more than 75% in the past year, from 512p to 907p.

This kind of growth intrigues me, so I began digging into this FTSE 100 company’s financials. 2020 revenue rose just under 1% to £6.16bn, despite temporary store closures. Even with increased Covid-19 costs, it managed to score a pre-tax profit of £421.3m — down just 5% year-on-year. What excites me for the future is that 55% of the company’s total sales worldwide came from the US and mainland Europe in 2020. This shows a strong international presence that can be built upon. I think JD can become one of the top sports retailers on the planet, and has plenty of growth in it yet.

I still have some concerns though. While the risks of it are waning, I’m worried about the impact of a prolonged pandemic. Or worse, another pandemic in the future — I’m not planning on retiring any time soon, after all. An increase in direct-to-consumer sales from major brands could also hurt JD. With retail e-commerce accelerating rapidly, consumers may simply go straight to Nike or Adidas rather than shop at JD. Hopefully, there will be enough market share to go around though and JD did do every well in e-commerce in its latest year. 

GlaxoSmithKline 

Despite being one of the FTSE 100’s worst-performing shares over a year, GlaxoSmithKline is on my retirement watch list too. At its current price of 1,350p, this pharmaceutical giant is down more than 10% in the past 12 months. The FTSE 100 member is a dividend-paying stock, with a yield of 5.7%, which means passive income in my later years.

While GSK missed out on last year’s pharma rally, this was a one-off in my opinion. its dip was partly due to its regular vaccines business suffering during lockdown as people stayed away from doctors’ surgeries. The group’s turnaround is making progress. Sales of new pharmaceuticals rose by 12% to £2.5bn in Q3, accounting for 30% of all revenue. Glaxo also remained very profitable, with an operating margin of 22%. As the sixth-largest pharma company in the world, I believe GSK can remain at the top and provide my retirement with a passive income stream.

GSK is far from risk-free though, with many changes on the horizon. It plans to split in two in 2022 (the two ‘new’ businesses will focus on BioPharma and Consumer Healthcare), which may dent earnings. Its dividend is also set to fall for the first time in 15 years, which could hurt my retirement plans. This corporate restructuring could have mixed results and may lead to worse returns.

The post Why I’m buying these 2 FTSE 100 shares for retirement appeared first on The Twelfth Magpie.

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Jamie Adams has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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.

FTSE 100 recovery stock? 

Oil giant BP kicks off the new month by releasing Q4 and full-year numbers on February 2. And what a year it’s been!

BP’s shares tumbled like everything else back in March’s coronavirus-induced stock market crash, Despite rising 50% since the end of October, they’re still far below where they were 12 months ago. And Covid-19 might not be entirely to blame. BP’s decision to focus more on renewable energy going forward is sound, but will also take time… and lots of cash. 

Perhaps I should be more positive. After all, a 5.5% dividend yield isn’t to be sniffed at. Moreover, we could see a revival of oil prices in 2021 as vaccine programmes are rolled out and the global economy emerges from its enforced slumber. As such, I think a confident statement on BP’s outlook from management might see the shares recapture their mojo.

Even so, it’s hard to look beyond the fact that the firm is very dependent on something beyond its control. With its substantial amount of debt, I currently consider BP a risk too far.

GlaxoSmithKline 

Hot on the heels of BP, pharmaceutical firm GlaxoSmithKline issues its Q4 and full-year results to the market on February 3. Like its FTSE 100 peer, Glaxo has hardly impressed lately.

Over the last year, the shares have fallen 20% in value. In fact, they now fetch almost exactly the same price as they did five years ago!  Investing may be a long-term endeavour but I wouldn’t begrudge any holders from feeling disgruntled, especially given how other top-tier stocks have performed in recent times.

Then again, it might be argued that those invested in the company care little for what happens to the share price, at least in the short term. On the income front, Glaxo doesn’t disappoint. An expected 80p per share cash return gives a yield of 5.7% at the current share price. And unless next month brings some unexpected news, this payout looks likely to be covered sufficiently by profits.

Trading at 12 times FY21 earnings, I continue to mull over snapping up GSK for my portfolio.

BT

BT’s recent share price performance is arguably the most depressing of all three stocks. The communications giant’s valuation has been drifting steadily lower since 2016. Last year, it underperformed the FTSE 100. Unfortunately, I’m not so sure next month’s Q3 trading update on February 4 will reverse this trend.  

As an investor, I can forgive a company experiencing issues if I’m being compensated for my patience. On this front, however, BT currently disappoints. With a pension deficit to plug and further infrastructure investment required, dividends have been suspended.

It’s not all bad. A P/E of just 7 times earnings suggests a huge amount of bad news is already priced in. This valuation also looks seriously cheap considering BT has the largest market share of internet broadband suppliers. 

Notwithstanding this, I can see the share price moving sideways even if revenues come in better than expected. Recent news that the firm faces a £600m lawsuit alongside strike action from Openreach staff, isn’t exactly the run-up to results day management will have wanted. 

The post Where next for the share prices of FTSE 100 stocks BP, GlaxoSmithKline and BT? appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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.