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BP, Lloyds or Tesco: which FTSE 100 stock would I buy now?

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This has been a great year for FTSE 100 stocks. But I think there is still a lot of upside to these listed companies, which could become visible next year. Here I look at three stocks, that in my view hold much promise. These are BP (LSE: BP), Lloyds Bank and Tesco. But if I had to choose one of them to buy, which one would be it? Read on to find out!

BP: oil price bonanza

First let us consider the oil biggie BP. The stock has made pretty good gains in the past year: its share price is up by over 30%. But here is what convinces me that there is still much more value to it. Even at the present price, the stock is still trading at levels below it was at before the pandemic started. In fact, it is a whole 30% below these levels. 

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And this is when oil price and demand is expected to be strong in the foreseeable future. It did report a loss in the latest quarter, but it was more due to accounting requirements than underlying challenges. And for the first nine months of 2021, it has still reported profits. That it pays a dividend, and has a pretty decent dividend yield of 4.7%, also works in BP’s favour. I already own the stock, but I think there is a strong case for buying more of it for the next few years. 

Lloyds Bank: recovery play

Lloyds Bank, too, is ready for high growth in my view. The bank has struggled for a long time. Like BP, its share price too is still below early 2020 levels. And this is when its results are strong once again. Interest rates are expected to start rising soon enough, which could give banks some flexibility to increase loan rates. And it can also now decide dividends at its own discretion, which was not possible recently due to pandemic-related regulatory requirements.

I am concerned about high inflation, since it might impact the recovery. If recovery continues to be weak in the UK, Lloyds Bank could suffer. But it is equally possible that the inflation challenge will be met effectively without damaging growth. I am quite optimistic about Lloyds Bank for 2022. It is on my list of stocks to buy. 

Tesco: FTSE 100 pandemic gainer

Supermarket Tesco really made the most out of the pandemic. While other FTSE 100 grocers like Sainsbury’s struggled, it powered ahead by adapting fast to a changing situation. As a Tesco customer myself, I have witnessed the consistent improvement in its home delivery orders. And this shows in its latest half-year results too. For these reasons, the stock remains a buy for me. But of the three stocks under discussion here, I think it could be most negatively impacted by inflation, which makes me bit sceptical if its share price could rise much in the foreseeable future. 

That leaves the choice between BP and Lloyds Bank. Ideally, I would be more inclined towards the oil producer for now. But since I have already bought it, Lloyds is also a good buy for me now.

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Manika Premsingh owns shares of BP. The Motley Fool UK has recommended Lloyds Banking Group and Tesco. 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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