Whisper it, but markets have started 2023 in a fairly optimistic mood. And I’ve been buying into this positive momentum via a couple of FTSE 100 shares.
Battered FTSE 100 share
I’ve owned Scottish Mortgage (LSE: SMT) shares for a few years now. So I’ve known the good times and, more recently, the seriously rubbish times.
For those unfamiliar, this investment trust invests in some of the most promising and disruptive companies in the world. Unfortunately, this focus was deeply unpopular in 2022.
I say ‘unfortunately’ but, on reflection, this is just what I want as a long-term investor. Sure, being able to call the high and sell up before the fall would be great. But it’s simply not something I can do, at least consistently.
As such, I’m regarding any dip (or crash) as an opportunity to pick up shares from more myopic market participants.
Green shoots
Now seems as good a time as any for me to be buying Scottish Mortgage. The economic data from across the pond suggests we’ve now seen the peak in inflation.
This being the case, the Federal Reserve may elect to slow the rate of interest rate hikes. That’s generally good news for those needing to take on debt to grow.
And when the US acts, the rest of the world tends to follow suit.
Now, a rebound won’t happen overnight. However, I’m finding it hard to ignore many of the themes SMT taps into, such as the transition to electric cars (Tesla), the use of new technology in healthcare (Moderna) and the draw of luxury brands (Kering).
Nor can I ignore this trust’s track record. Despite last year’s monumental ‘blip’, Scottish Mortgage has delivered 81% in five years. The FTSE 100 is up 11%, not including dividends.
No investment style works all the time. So I’m buying more before the going gets good.
All priced in?
After months of thumb-twiddling, February has also marked my entry into the property sector via housebuilder Persimmon (LSE: PSN).
So what’s pushed me to finally buy? Well, housebuilders are in a tough spot right now. Rising interest rates and a cost-of-living crisis have hit demand.
On a more positive note, I think a lot of this bad news is now reflected in the price. Persimmon shares trade on 11 times forecast earnings. And that’s based on earning growth halving this year.
Dividend cut ahead?
This is not to say that this is a risk-free investment. Quite the opposite. Despite the Bank of England now expecting a recession to be shorter than previously expected, house prices could continue falling throughout 2023.
We also know that a dividend cut is very likely at the business. Right now, analysts are forecasting the payout to be roughly halved to 96p per share in FY23. As I type, that gives a dividend yield of 6.5%.
Of course, a bigger-than-expected cut could push more investors to dump the stock. Any surprise on the upside is likely to draw income hunters in.
Regardless, I think that yield is more than sufficient compensation for being asked to wait for a recovery. And let’s be clear, that rebound will come. The ongoing shortage of affordable and quality housing in the UK will see to that.
I’ll buy more on any further weakness.
