1 FTSE 100 stock to buy and one to sell

Rupert Hargreaves explains why he’d sell this FTSE 100 stock, with a mixed outlook, and buy its peer, which has great growth prospects.

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I think there are plenty of attractive investments in the FTSE 100 at present. However, some companies appear more attractive than others, and some I would not buy at all. 

As such, here is one FTSE 100 stock I would buy today and one I would sell straight away. 

A FTSE 100 stock to sell

I will start with the company I would sell first. This enterprise is Anglo American (LSE: AAL), the mining giant with operations worldwide. 

I am pretty optimistic about the mining sector in general. Commodity prices are rising, and demand for essential commodities is increasing as the world starts to rebuild after the pandemic. 

Some companies will undoubtedly benefit from this, and I think Anglo may also to a certain extent. But unlike some of its peers, such as BHP, which have a solid track record of allocating capital effectively and capitalising on rising resource prices, the FTSE 100 firm has a spotty record. This concerns me. I would rather own a miner such as BHP, which has more significant economies of scale and a better operational track record. 

Commodity prices can be volatile, and there is no guarantee Anglo will be able to navigate the volatility with success. Therefore, I plan to avoid this stock and would sell it if I already owned it, despite the chance that it could benefit from any commodities boom. 

Growth stock

I believe the best FTSE 100 companies to own are those businesses with a strong brand and defined customer base. I think Prudential (LSE: PRU) ticks all these boxes. The Asia-focused financial services group’s brand is well known and trusted in its key markets. This provides the organisation with a competitive advantage to take on peers. 

The rising wealth of the middle class across Asia could drive something of a financial renaissance across the region over the next few decades. The number of consumers with products like life insurance and pensions is relatively low compared to Western markets. This presents a considerable opportunity for Prudential. Using its brand, I think the group can grab market share from other companies in the sector and capitalise on the low penetration of financial products across the market. 

That being said, the company is going up against deep-pocketed competitors, such as China’s state-owned banks. It may struggle to compete with these firms if they decide to attack its market share, considering their virtually limitless resources. At the same time, if the group loses its licence to operate, growth could come shuddering to a halt. 

Despite these risks, I would buy the FTSE 100 stock for my portfolio today. As well as the reasons outlined above, the company is also one of only a few Asia-focused equities in the blue-chip index. That means it is one of the only ways investors can build exposure to Asia’s fast-growing economies. Considering the region’s growing economic importance, I want to have some exposure to it in my portfolio. 

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.

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Prudential. 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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