My top 3 FTSE 100 shares to buy in December

Quality businesses at discount prices. G A Chester highlights three FTSE 100 shares that have made it to the top of his buy list for December.

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Three global companies are currently at the top of my list of FTSE 100 shares to buy in December. The Covid-19 pandemic has impacted their businesses to different degrees. However, all three are quality operators, and I reckon their discount prices make them very buyable for the long term.

This FTSE 100 share is dirt cheap

In its half-year results in July, British American Tobacco (LSE: BATS) reported: “The business is performing well in difficult circumstances.”

Management said it expects constant currency adjusted revenue growth of 1-3% for the full year. This is below its medium-term 3-5% target. But that’s a highly creditable performance, given an estimated 3% headwind from Covid-19. Similarly, guidance for mid-single-digit growth in earnings is admirable, but lower than the post-Covid-19 target of high single digits.

The guidance puts BATS on a sub-10 price-to-earnings (P/E) ratio. And with the company committed to a 65% dividend pay-out ratio, the prospective yield is north of 7%.

I think the stock is cheap, and that management has a credible strategy for future growth. Its aim is to accelerate reduced-risk ‘new categories’ revenue at a faster rate than total revenue. Its recent acquisition of Dryft Modern Oral enhances its portfolio of new-category products, and will contribute to accelerated growth.

Healthcare also features among my shares to buy

In a third-quarter trading update last month, global medical technology group Smith & Nephew (LSE: SN) reported “a substantial improvement in performance over the previous quarter.”

Q3 underlying revenue was down 4.2% compared with a 29.3% slump in Q2. The improvement came as global levels of elective surgery recovered. Indeed, SN actually saw growth in its two largest markets, the US and China.

Despite the challenging year, the company has continued to invest in its medium-term ambitions. Namely, to consistently outgrow its markets and increase its trading profit margin. To this end, it’s continued with major new product launches, as well as making an acquisition that expands its portfolio in higher-growth extremity orthopaedics.

Analysts are forecasting a big increase in EPS next year, leading to a sub-20 P/E and 2% dividend yield. I think the valuation is attractive for a company with strong structural growth drivers in the shape of ageing populations and rising healthcare spend in developing economies.

A go-to FTSE 100 share I’d buy

Food and household goods favourite Unilever (LSE: ULVR) last month reported underlying sales growth of 4.4% in its third quarter. Management pointed to “the resilience of our portfolio and our agility in responding to rapidly changing dynamics across consumer segments, geographies and channels.”

Growth was particularly strong in home and hygiene, with germ-killing and antibacterial products seeing strong demand. Demonstrating the aforementioned agility, the company launched Domestos in China, as well as extending the brand to bleach-based spray and wipe formats.

The group owns a formidable array of much-loved names across its divisions. Personal care brand Dove, whose range has been extended into the antibacterial segment, and food favourite Hellmann’s are just two of 12 brands in its 400-strong portfolio that generate sales of over €1bn a year.

Based on current-year earnings and dividend forecasts, ULVR has a P/E of around 20, with a 3.2% yield. Global brands powerhouses are rare and valuable jewels, and I reckon the P/E and yield represent excellent value.

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.

G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended 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.

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