Best stocks to buy now: how I’d invest £2K in the FTSE 100

These FTSE 100-listed companies are two of the best stocks to buy now, according to Andy Ross. He likes that both have a lot of quality and pricing power.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

With the UK stock market struggling recently, I think it’s been a good time to look at the best stocks to buy now. With inflations concerns increasing, I’ve been thinking about how I’d invest my next £2,000 in FTSE 100 companies and which ones they’d be.

One of the best stocks to buy now

The orthodox opinion is that stocks won’t do that well if inflation persists. However, some stocks will do better than others – especially long term. I think that whatever happens, a company with strong margins and pricing power should do well. That’s why I’m keen to add more to my holding in fast-moving consumer goods (FMCG) group Reckitt (LSE: RKT).

Reckitt has always had good margins and pricing power and I expect them to normalise as the economy recovers after they took a hit in 2020.

I think it’s smart to focus on having fewer brands, but marketing them more strongly. The big market share of its brands probably means high customer loyalty and repeat sales, which is good for revenues and profits.

By generating sales all over the world, Reckitt is not overly exposed to any one country or region. To me, this makes it less risky than less globally-focused companies.

The fact that expectations are quite low because of the underperformance in recent years could give management a chance to shine. If investors warm to a strategy for future growth, the share price could do really well.

Possible headwinds

The share price could also face some headwinds, however. One might be the sale of the China baby formula unit, which the current CEO’s predecessor overpaid for, but that could have contributed a lot of topline growth.

Another headwind could be a slowdown in the buying of cleaning products, if people become more relaxed about the hygiene as the pandemic eventually recedes. Reckitt sold a lot of its cleaning product in 2020, making it harder to achieve year-on-year growth this year as things return to normal.

Yet its pricing power, strong brands and relatively cheap share price, combine to make Reckitt potentially one of the best stocks to buy now for me. I’ll likely add to the position I already hold in the company.

Another FTSE 100 company I like

The other group I’m thinking about adding to my portfolio is stockbroker Hargreaves Lansdown (LSE: HL). For a FTSE 100 company it has quite strong growth credentials. Operating profit went from £198m in 2015 to £377m in 2020.

The shares have always had a high P/E, but at 28, that’s broadly in line with what it has been historically. High margins, fast revenue and operating profit growth, and high returns on capital employed all combine to make me think Hargreaves Lansdown is a quality business. That’s why I think it’s one of the best stocks to buy now, especially for the long term.  

The downside, obviously, is the P/E, so there’s a valuation risk there. Also, the company has suffered some reputational damage given that it promoted Neil Woodford’s failed funds. But the quality for me far outweighs these risks and I may add it to my own 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.

Andy Ross owns shares in Reckitt. The Motley Fool UK has recommended Hargreaves Lansdown. 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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »