2 hot FTSE 100 stocks I’d buy in February

These two shares appear to be sound buys right now.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The FTSE 100 has been exceptionally volatile in 2017. At its height, it has been up by as much as 2.8% as it surpassed previous all-time highs. However, in recent days it has slipped back to trade at exactly the same level as which it started the year. It looks as though this highly volatile few weeks will continue throughout February and possibly during the remainder of the year. While it may make many investors unsure about buying shares, now could prove to be the right time to buy these two FTSE 100 companies.

An evolving retailer

Tesco (LSE: TSCO) is quickly becoming a very different business to that which current CEO Dave Lewis inherited. Previously, it had set its sights on becoming a global retailer through US expansion and growth opportunities in Asia. Furthermore, it had sought to diversify into a wide range of activities including film rental and technology products. However, it’s now focused on getting back to food basics and its acquisition of Booker would be another move in that direction.

The combined company could become an even more dominant food retailer in the UK. It could enjoy size and scale advantages over rivals, while also generating efficiencies over the medium term. Even without the potentially positive impact of Booker on Tesco being included, the company is forecast to record a rise in its bottom line of 31% next year, followed by 32% the year after. Despite this, it has a price-to-earnings growth (PEG) ratio of only 0.5, which indicates that it offers excellent value for money.

Tesco has previously been considered a turnaround play by many investors. While it’s not yet turned around, it’s well on course to delivering rapidly rising profits. As such, now could be the perfect time to buy it.

A safe pair of hands?

Brexit is likely to be a dominant news story this year, so it’s important to consider which companies could be negatively impacted if talks between the UK and EU turn sour. One company which has stated that Brexit is unlikely to have a significant impact on its financial performance is Aviva (LSE: AV).

The life insurer currently trades on a price-to-earnings (P/E) ratio of only 9.6, which indicates that it offers a wide margin of safety. This is somewhat understandable given the fact it’s currently integrating Friends Life into its business and this entails a degree of risk. But given the company’s growth outlook, such a low rating is difficult to justify. For example, Aviva is forecast to record a rise in its bottom line of 13% this year and 6% next year, which means its earnings should rise at a faster rate than those of the wider index.

Added to this is a yield of 5.5%. With dividends covered almost twice by profit, there appears to be sufficient headroom for Aviva to raise shareholder payouts in future. For long-term investors, buying high quality stocks at low prices is usually the main aim of investing. Aviva is a company that appears to firmly tick both of those boxes.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Aviva and Tesco. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »