2 blue chip FTSE 100 shares to buy for the market recovery

With the FTSE 100 down 5.3% this year already, I am looking at some blue-chip stocks to bolster my portfolio before the recovery.

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Since January, we have witnessed a mini tech crash, inflation pressures, and the invasion of Ukraine. For investors, a volatile period like this can be stressful. But with the FTSE 100 down over 5% this year, I think it is a great time to finally invest in those premium blue-chip stocks that always seemed too expensive. Here are the two picks that I’d add to my portfolio in a heartbeat.

British industry leader

Blue-chip stocks are generally the biggest and most consistent and reputable companies listed on an index. These companies usually have a huge market share and a strong history of investor returns. And in the past decade, Diageo (LSE:DGE) has embodied this better than most FTSE 100 companies.

The global alcohol giant owns huge names like Johnnie Walker and Guinness and has leveraged recent revenue to acquire huge local names across emerging alcohol markets. Sales have increased steadily year-on-year and the excess cash has been reused effectively. Diageo recently announced a £4.5bn share buyback to be completed by 2023.

Strong sales growth in China and India means the company now expects to add over 10mn loyal customers by 2030. Diageo also launched a US$75m carbon-neutral distillery project in China last year. I think this Asia push could allow the brand to sustain its current global dominance.

Diageo is currently trading at 3,432p, down 16% since the start of this year. Looking at the share price movement from the pandemic lows to the recent all-time high of 4,030p in December 2021, I think Diageo shows strong recovery potential.

Growing risk of regulation is the biggest concern for the alcohol sector right now. Health taxes could cripple the booming alcohol market which would affect its sales directly. Despite this concern, I think Diageo’s business plan and market share will help it retain its position as one of the most reliable FTSE 100 shares over the next decade as well. This is why I am planning on purchasing Diageo shares if it dips further.

Brand value

Consumer goods brand Unilever (LSE:ULVR) is the next blue-chip FTSE 100 share I’d buy right now. Much like Diageo, the UK giant owns a host of popular brands in its segment like Dove, Lipton, and Vaseline.

With growing inflationary pressures, I would like to add companies with pricing power, like Unilever, to my portfolio right now. If a company can pass on some of the excess costs to its consumer without losing a major chunk of sales, it almost ensures revenue growth even during turbulent periods. Unilever recently streamlined its operations and this move is expected to save about €600m over two years, which will fund its marketing and R&D wings. I think this will give it a long-term edge over smaller competitors who will struggle to offset revenue losses.

Going forward, the company expects 2022 sales growth to be between 4.5% and 6.5%. Given that this rate of growth is not earth-shattering, there is a risk of share price stagnation. Investors could opt to invest in more exciting sectors which would affect Unilever’s price action. The brand also faces stiff competition from the rise of generic alternatives and discount retailers. But being a well-established FTSE 100 consumer goods giant, I think Unilever is well placed to handle market volatility, which is why I think it is a prudent recovery play for my portfolio now.

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.

Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo and 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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