3 promising FTSE 100 names I’d buy for a stocks and shares ISA

Why I think these three FTSE 100 (INDEXFTSE: UKX) shares could do well in 2019 and beyond.

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You’ve got until April 5 to load up this year’s £20,000 allowance in your stocks and shares ISA. The allowance resets on April 6, but if you don’t use up this year’s allowance it will be gone forever.

Stock markets have been in retreat since the autumn, and the valuations of some of the underlying businesses look attractive. Dividend yields have been driven up and it is potentially a great time to buy shares as long as you don’t believe that a 2008-style general economic collapse is just around the corner. I don’t, so I’m hunting for shares right now.

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Digesting a big acquisition

Global software company Micro Focus International  (LSE: MCRO) has seen its share price plunge around 45% over the past year. A profit warning in March did the most damage and arose because the firm was having trouble integrating its gargantuan $9bn acquisition of Hewlett Packard Enterprises’ software business.

However, in a trading update released during November, the firm said revenue was on an “improved trajectory” in the second half of the year to October 2018, albeit set to come in around 6% lower than the previous year. Meanwhile, the shares value the firm at an earnings multiple around nine and the dividend yield is near 5.8%. I think that looks like decent value and it could be worth collecting the dividend while waiting for a return to growth.

Braced to ride the cycle

Private equity and infrastructure investment company 3i Group  (LSE: III) said in its half-year results report in November that it is not “immune to market developments,” but the directors believe that “careful asset management and clear strategic focus” leaves the portfolio“better positioned than in the past.”

Many of the firm’s investee companies operate in cyclical sectors such as retail and the headwinds in such sectors have been well reported. But 3i reckons its balance sheet strength will help it “withstand market turbulence.” The firm plans to hold investments for longer if necessary, which would enable it to ride the dips and exit investments on the peaks of the cycle later. Meanwhile, a forward price-to-earnings multiple just over six and a dividend yield a little higher than four seem to factor in the uncertainty in the outlook.

Trading well, yet the stock market is nervous

One prominent victim of the stock market sell-off has been paper-based packaging products manufacturer Smurfit Kappa Group  (LSE: SKG). The company makes containerboard, corrugated containers, solid board, graphics board and bag-in-box for Europe and the Americas. It seems to me that the stock market is worried about the potential for a cyclical slowdown in the business. But at the end of October, the company said in a trading statement that its key performance measures showed significant and continuing improvement.

Indeed, City analysts following the firm expect ongoing annual advances in revenue and earnings. Yet the valuation languishes on a forward earnings multiple around 7.6 for 2019 and the dividend is yielding about 4.5%. I think the stock is attractive.

Arguably, the best time to pick up shares is when the outlook is a little murky and valuations are compressed. I think we are seeing that situation with these three firms today.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Micro Focus. 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.

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