3 top FTSE 100 shares to buy as the index nears a record high

FTSE 100 shares are soaring today as UK GDP numbers beat expectations. With the index close to an all-time high, our writer picks three stocks he’d buy.

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FTSE 100 shares are surging as good news about the economy is alleviating recession fears among investors. As macroeconomic conditions show budding signs of improvement, I’m bullish on UK shares in 2023.

I think there are several bargains in London’s blue-chip index. Despite the wider rise, the share prices of multiple Footsie companies are down on a 12-month basis. In this context, I’m looking for discounted valuations with a view to adding cheap stocks to my portfolio.

Let’s explore three I intend to buy next week.

GSK

The GSK (LSE: GSK) share price fell 13% over the past year.

Although the pharmaceutical stock has lagged behind competitors like AstraZeneca, I think it could bounce back in 2023.

GSK shares recently received an uplift following a US judge’s dismissal of 50,000 personal injury claims alleging that the firm’s former heartburn medication Zantac caused cancer.

Although the ruling can be appealed, this development is a huge positive for the company. Analysts’ estimates for the potential compensation liability ranged from $17bn to $45bn.

After demerging its consumer health arm Haleon last year, the newly streamlined GSK focuses on biotech opportunities from drug and vaccine development.

This appears to have benefited its financial position. The company recently lifted its full-year 2022 guidance, projecting sales growth between 8% and 10% and adjusted operating profit growth between 15% and 17%.

The business faces risks from the expiry of patents protecting its HIV drug Dolutegravir in 2027 and 2029. This could hurt the share price, but I’m optimistic GSK can replace lost revenue with candidate medicines and vaccines in its R&D pipeline.

Taylor Wimpey

The Taylor Wimpey (LSE: TW) share price has tumbled 29% over 12 months.

I believe the housebuilder could be a contrarian play that should benefit if the housing market exceeds gloomy expectations this year.

Rising mortgage rates are a challenge for Taylor Wimpey shares. Property firm Savills predicts house prices could drop by 10% this year, which would be a headwind to growth.

Nonetheless, with the company trading at an attractive price-to-earnings ratio just above 7, I think there’s a good chance negative forecasts are priced in.

If UK inflation falls faster than expected, the Bank of England could pause further rate hikes. This would potentially lead to an uptick in housing market activity, likely benefiting Taylor Wimpey in the process.

What’s more, there’s a juicy 8% dividend yield on offer. I consider the risk/reward profile to be appealing and I’ll enter a position next week.

Tesco

The Tesco (LSE: TSCO) share price is down 15% compared to a year ago.

The supermarket recently revealed bumper Christmas sales, defying worries that shoppers would pinch pennies in the cost-of-living crisis.

Few FTSE 100 shares are immune to high inflation, but supermarket stocks are particularly vulnerable. The discounting war driven by budget chains like Aldi and Lidl compounds this, forcing Tesco’s margins down in its efforts to price-match.

Nonetheless, it was the only major grocer to increase its market share versus pre-pandemic levels over Christmas.

There was particular strength in fresh food, with sales up 8.1%. In addition, online sales are now 59% higher than before the pandemic.

Better than expected results and a 4.7% dividend yield make Tesco shares a buy for me next week, despite the risks.

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.

Charlie Carman has positions in AstraZeneca Plc. The Motley Fool UK has recommended GSK, Haleon Plc, and Tesco Plc. 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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