UK stocks are highly volatile right now as investors fret about everything from high inflation to the unfolding crisis in the Middle East. As stock prices fall I’m looking to buy world-class FTSE 100 companies that should thrive in the long run, despite today’s uncertainties.
Private equity is a tough sector to operate in today, as borrowing costs rise while selling companies proves harder. Despite that, private equity and venture capitalist 3i Group is one of the best performing stocks on the FTSE 100, when investors might expect it to number among the worst.
It helps that it has been operating in this field since 1945, so knows what it’s doing. I’m a little worried that half its portfolio is now invested in Netherlands non-food discounter Action. But that didn’t stop me buying its shares in the summer. Twice.
I’m thinking far ahead
Pharmaceutical group GSK has had an underwhelming few years. Its once-mighty dividend has been stagnant while hiving off consumer healthcare business Haleon hasn’t exactly been a game changer. GSK has been overshadowed by rival pharma AstraZeneca. However, its future is looking a little brighter as sales and earnings rise, particularly in HIV and vaccines. Its product pipeline is getting stronger too.
GSK is a lot cheaper than Astra, trading at 10.7 times earnings against 60.77 times. Plus its 4.22% yield is more exciting than Astra’s 2.28%. It has plenty of comeback potential for investors who are willing to be patient.
FTSE 100 mining giant Glencore is another stock I’d buy today with the intention of holding for decades. Again, it has struggled lately on bad news from China and concerns about a recession in the US.
Given all of today’s financial and geopolitical worries, I’m not expecting an immediate recovery here either. But with the stock valued at just 3.96 times earnings, it seems too good an opportunity to miss. As does its 7.86% yield.
These five should thrive
Consumer goods specialist Unilever is another world-class company, selling more than 400 brands across 190 countries. Yet its recent share price performance has been disappointing, as management blundered into culture wars while the cost-of-living crisis tested its pricing power. Volumes have declined slightly, and I’m beginning to wonder whether some of its product lines are looking a little jaded.
With a new CEO, Hein Schumacher, appointed in July, Unilever is ripe for an overhaul. Schumacher has a long journey ahead. However, today’s valuation of 17.88 times earnings is dirt cheap by Unilever’s standards.
My fifth and final pick is Barclays. Like fellow FTSE 100 banks Lloyds Banking Group and NatWest Group, it’s unloved and out of favour. But looks like a contrarian investor’s dream. It trades at just 4.92 times earnings and yields 4.91%, as investors fret over rising interest rates, falling house prices, war, recession and all the rest.
I’m worried about all that stuff too. However, I’m not looking to buy shares I think will do well today or tomorrow. I’m taking a minimum 10-year view and, over that timescale, I think Barclays will more than recover its lost value. As ever, there are no guarantees. But these five look good long-term bets to me. I’ve bought some and the rest are on my buy list.
