The FTSE 100 closed last week just below 7,600 points. This marks a strong bounce from early May, and also puts it within 100 points of fresh highs for the past year.
It does seem that there’s some cautious optimism floating around in the stock market. As we go into June, I think there could be further gains ahead for some selective FTSE 100 stocks. Here are three I’d invest £500 in.
A transforming business
The first company I like is Imperial Brands (LSE:IMB). It’s up 9% in the past month, and 11% over the past year. The tobacco company is 18 months into a five-year strategy transformation. This is to help it become more consistent and stable for future earnings.
Half-year results released in May showed that progress with the next generation products is going well. It said that “in next generation products, consumers have given positive feedback on our recent trials, validating our new insights-driven approach”.
The business is also well diversified, with 70% of operating profits coming from the main five markets. I do think that the business could focus on spreading this even further. One risk that I see is that some investors won’t touch this lead index stock as they think it’s unethical. This could dampen enthusiasm for the stock.
A high-dividend-yield FTSE 100 stock
The second FTSE 100 share I’m going to buy is M&G (LSE:MNG). The share price is down 10% in the past year, but has popped 3% in the past month. A global investment manager, the company has £370bn in assets under management (as of the 2021 annual report).
Why I’d invest £500 in this share in June is primarily due to the dividend yield. It currently sits at 8.4%. This makes it one of the highest yielding companies in the FTSE 100. It has strong operating capital generation (£1.1bn last year) which allows it to have liquidity for dividend payments. I think this business model should continue.
A concern I do have is the volatility in financial markets at the moment. If we see a market crash towards the end of the year, assets under management could fall as investors pull money back to cash.
A high street stalwart
The final stock I’m eyeing up is Next (LSE:NXT). The FTSE 100 share has spiked 11% in the last month, but is down 20% in the past year. In recent Q1 results, full-price sales jumped 21.3% versus the same period last year. I need to take this with a pinch of salt, as Q1 2021 had us still in some form of pandemic restrictions. Yet what encouraged me is that the guidance for the next year is for sales to continue to rise.
The business is probably my highest-risk choice of the three. Part of the problem here is the risk due to inflation. The business has said that homeware product prices will rise by 13% on average in the second half of this year. Add in a squeeze on disposable income for many in the UK and it could find that both homewares (and its discretionary-item fashion sales) could be hit as people can’t afford the products anymore.
On balance, I still think I’m going to put £500 into each of the above three FTSE 100 companies.
