The FTSE 100 recently surpassed 7,000 for the first time since the beginning of March last year. I think the index could move higher in the months and years ahead.
As such, I’ve been searching for blue-chip stocks to add to my portfolio to invest in this recovery. Here are two FTSE 100 stocks I’d buy for my portfolio today.
Economic recovery play
Distributor of plumbing and heating products Ferguson (LSE: FERG) could be a great way to play the housing boom that’s currently taking place in the UK and United States. The company, which has operations across both, serves their home improvement and construction markets.
Activity in the UK housing market is booming, leading to higher demand for new properties and developments to existing properties. Ferguson could see a substantial increase in sales as a result.
Indeed, City analysts are already forecasting a 13% increase in earnings per share for 2021. However, these are just projections at this stage. Still, I think they show its potential.
As the scale of the property market boom has become clear over the past 12 months, analysts have upgraded their forecasts for growth by nearly 30%.
But what goes up can also go down. If the housing market starts to show signs of weakness, demand for plumbing and heating products may decline. This could have a significant impact on the company’s bottom line.
This is the main challenge the group faces right now. It may see explosive growth in the 12 months ahead, but that’s unlikely to last forever.
But as I’m well aware of the cyclical risks of investing in the construction sector, I’m comfortable buying this FTSE 100 stock for my recovery portfolio today.
FTSE 100 growth
The other blue-chip stock I’d buy today is the commodity group Glencore (LSE: GLEN). The prices of essential commodities have exploded over the past few months as demand has increased.
Massive infrastructure spending programmes have been unleashed by governments worldwide over the past few months to try and restart growth after the pandemic. This has sent demand for commodities skyrocketing.
Mining corporations will be the primary beneficiaries. However, alongside mining, Glencore is also the world’s largest commodity trader.
Trading is low margin and high volume. It’s also essential and provides a level of diversification for the group. For example, if commodity prices fall, income from the business’s trading operation should offset declines at the mining division.
But commodity trading also requires a lot of debt. This borrowing and low-profit margins can amplify risks. A few years ago, the organisation nearly faced a cash crunch when investors became concerned about elevated levels of debt. This could have decimated Glencore’s business model. Therefore, this company may not be suitable for all investors.
Even after taking this risk into account, I’d buy the FTSE 100 commodity group for my portfolio today. I think it’s one of the best ways to play the economic rebound in the years ahead.
