I’m looking at FTSE 100 shares to buy before the next bull run. The UK index has reached the benchmark of 7,500 and closed above the figure last week for the first time in two months.
However, in my opinion, this does not mean that this index has recovered equally. Instead, we can see that the FTSE 100 — which consists of the 100 largest UK-listed firms — has been dragged upwards by oil and mining stocks that have done particularly well this year.
So I still see now as a good time to invest, buying in at discounted share prices as part of my long-term strategy to generate wealth. Here are two of my top FTSE 100 stocks I’m buying now.
Persimmon
I appreciate that housebuilders are in vogue right now. House prices have hit all-time highs and with an economic downturn on the way, many investors are staying clear of housebuilders.
In fact, Persimmon‘s (LSE:PSN) share price has been on a downward track for over a year amid concerns about the impact of the government’s strategy to get housebuilders to pay to reclad thousands of homes. In the end, Persimmon said the fire safety pledge would cost it £75m, less than 10% of pre-tax profits.
Meanwhile, the are concerns that inflation will damage margins and that interest rates will push down demand. However, right now, housebuilders are posting extraordinary profits as house prices peak. And those prices are unlikely to drop substantially.
Persimmon recently said that H1 profits were up and above expectations, despite completing on few units that planned. These units will likely be delivered in the next quarter, so it’s worth remembering that this revenue hasn’t been lost.
“What’s not to like about making the same level of profit using less units?”, brokerage Liberum said in a July update.
And the company has a strong order book too. There may be some short-term challenges as interest rates push demand down further, but I’m confident that the firm has the capacity to weather these challenges.
In the long run, there is an acute shortage of housing in the UK and demand will outstrip supply.
The stock is down 38% over the past 12 months, and even more over 18 months.
Barclays
Barclays (LSE:BARC) is currently trading with a price-to-earnings ratio of just 4.5 after a sizeable fine cut into the last quarter’s profits, causing the share price to tank.
In late July, Barclays reported a fall in pre-tax profits, due to a £1.9bn charge to cover the cost of buying back securities it sold in error and a £300m impairment provision for bad debts amid the cost-of-living crisis.
However, down 7% over the past year, I see now as a good time to buy. Higher interest rates are pushing Barclays’ margins up to levels not seen in over a decade. Banks have suffered to an extent during the last decade of near-zero rates.
For example, the average mortgage repayment was up £70 a month before the last 50 basis point hike. So it’s clear these incremental changes in interest rates will have a profound impact on the bank’s income.
