Buying FTSE 100 stocks today may not be an appealing idea to many investors. After all, the Footsie has just crashed below the 6,000 level again, and prospects for the economy and stock market continue to be very uncertain.
However, there’s now an abundance of low valuations in many sectors. As such, this could be the right time to invest in a diverse range of cheap shares for the long term. Here are five FTSE 100 stocks I’d be happy to buy today. I reckon they could deliver impressive returns in the years ahead.
Five stocks across five sectors
I mentioned a diverse range of stocks. My FTSE 100 picks are from different industries:
- National Grid — utilities
- Coca Cola HBC — consumer goods
- Smith & Nephew — healthcare
- Legal & General — financials
- WPP — media
I believe all are well-positioned in their sectors to deliver strong long-term business performances. From their current share-price levels, I reckon this should translate into impressive investment returns in the long run.
Defensive FTSE 100 stocks
All of my picks are expected to post earnings falls in their current financial years. Three of the five operate in sectors traditionally seen as ‘defensive’. That’s to say the nature of their businesses means their earnings tend to be less impacted by the state of the economy than those of ‘cyclical’ stocks.
Due to National Grid’s status as a regulated near-monopoly business, it’s a defensive stock par excellence. City analysts expect its earnings to dip just 3% for its financial year ending March 2021. I view a rating of 15.5 times the forecast earnings, with a prospective dividend yield of 5.9%, as highly attractive for a defensive business.
Coca-Cola HBC is one of The Coca-Cola Company‘s largest bottlers. Due to pandemic lockdowns severely impacting sales to restaurants etc, it hasn’t been as defensive as in a regular downturn. Earnings are forecast to fall 20% this year, before bouncing back 25% in 2021. It’s trading at 15.6 times 2021 earnings with a prospective dividend yield of 2.8%.
Medical devices specialist Smith & Nephew is another firm whose usual defensive qualities have been undermined by the nature of the pandemic. This is because many countries put non-essential surgery — such as hip replacements — on hold. Smith & Nephew’s earnings are forecast to fall 35% this year, but to recover 55% in 2021. We’re looking at 18.2 times forecast 2021 earnings, and a prospective 2.1% dividend yield.
Cyclical FTSE 100 stocks
Surprisingly for a cyclical business, insurer and asset manager Legal & General has an earnings outlook more like a defensive business. Namely, a forecast 8% dip in earnings this year, followed by a 3% bounce-back in 2021. Mind you, its share price hasn’t shown any kind of resilience. As such, its trading at just 6.3 times forecast 2021 earnings, with a prospective 9.7% dividend yield.
Finally, FTSE 100 advertising giant WPP is another cyclical stock. This one’s forecast to post a 30% earnings drop in the current year, followed by a 30% rise in 2021. It’s trading at 7.7 times forecast 2021 earnings, with a prospective dividend yield of 7.3%.
Foolish bottom line
Buying cheap stocks in a market crash can be psychologically difficult. However, investors who do often reap the rewards further down the line. This is why I rate the five FTSE 100 stocks I’ve discussed ‘long-term buys’.
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G A Chester 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.