Why I’d invest in these 3 FTSE 100 stocks in May

The FTSE 100 suffered price volatility in late April. Let’s look at why I’m considering these three Footsie companies for my portfolio in May.

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The FTSE 100 dropped 3.3% in late April, falling from 7,627p to 7,380p. This is still under the wider 9% increase the FTSE saw over the past 12 months. But a fall’s a fall and this one was due to several issues.

UK markets felt the ripple of the Beijing lockdown as extended covid-19 testing was launched across the city. Further impacts were felt as concerns around China’s situation drove the price of Brent crude oil down.

Moreover, UK retail data for March showed low consumer spending, further shaking general investor confidence. However, a sharp price drop is usually accompanied by an opportunity to find cheap stocks. With recent fluctuations, let’s look at three FTSE 100 stocks I’m considering adding to my portfolio this May.

Share buyback

Taylor Wimpey (LSE: TW) announced last week that it had instructed Credit Suisse International to purchase up to £75m of its shares in March. This is part of the company’s larger £150m share buyback. Currently trading at 128p, the company will reclaim roughly 1.1m of issued shares. This should lead to a resurgence of share value for investors.

The construction company faces challenges from rising inflation rates and energy prices, which pressures the cost of living. This may undermine the future strength of the housing market.

For now however, housing prices continue to see growth. Taylor Wimpey claims this will offset labour and material cost inflation. 

Despite concerns of inflation and energy, the announced buyback, alongside prospective market resilience, encourages me to invest in this FTSE 100 stock.

Resilient infrastructure

Another FTSE 100 stock that has my interest is BT Group (LSE: BT.A). During times of high inflation and international crises, infrastructure-heavy companies (such as BT) are well-poised to counter market unrest in a portfolio, I feel.

Sitting at 176p, the stock’s recent price plunge (-3.5% in the last month) has stood out against its 12-month increase of 13%. Total net debt of £17.8m at the end of March flagged warning lights to investors.

However, the telecoms giant announced a partnership with GXO logistics back in February, aiming to transform its warehouse and transport capabilities in the UK. Large changes to supply chains appear daunting in this current market. Yet I’m confident in the company’s managerial competence, particularly given recent financial turnarounds. For example, BT managed to increase normalised free cash flow by 6%, rising to £878m.

Given strong infrastructure and intentions to expand on this due to an improving financial performance, I’ll certainly consider adding this FTSE 100 stock to my portfolio for May.

Record revenue and profits

Kingfisher (LSE: KGF) highlighted “a year of record revenue and profits” in its FY21 report. With retail profits increasing from roughly £1m to £1.15m, that 14.5% growth has prompted my interest in this UK retailer.

The DIY retailer does have risks. Sales could fall as pandemic-induced home-improvement projects are forgotten. Those who do not forget may be discouraged anyway by aforementioned rising inflation.

However, the company announced a return of over £550m to shareholders. Some £300m of this will be delivered through a share buyback, with the remaining distributed through dividend.

With significant profit growth, and promises of a substantial buyback, I’ll be looking to add this FTSE 100 stock to my portfolio this month.

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.

Hamish Cassidy has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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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