As we edge closer to 2024, I’m looking for FTSE 100 shares to buy. 2023 has largely been a year to forget. But that won’t deter me.
The Footsie is home to some of the best companies the UK has to offer. And with beaten-down share prices comes one thing — value.
I’m tipping these two shares to be the first additions to my portfolio in the New Year with any investable cash I have.
Burberry
If we’re talking about UK shares, we must talk about Burberry (LSE: BRBY). The fashion brand best known for its signature check is a British staple. That said, its stock has struggled in the last 12 months as inflation continued to bite and luxury saw a downturn worldwide. During that time, its dropped by over 25%. I think now could be a smart time to swoop in.
A year ago, I would have paid over 2,000p for a share. Today it would cost me just 1,560p. Now with a price-to-earnings ratio of around 13, I think Burberry shares look fairly priced.
What I’m more attracted to is its dividend yield. Sitting at 4%, this is in line with the FTSE 100 average. It’s covered around two times by earnings. Of course, it’s worth remembering dividends are never guaranteed.
The biggest catalyst behind Burberry’s downfall has been a slowdown in luxury spending. This is more than expected given the impact of inflation in the last few years. Consumers have tightened their belts and I expect this to continue for the foreseeable future. The business recently issued a profit warning for 2023.
But to me, that’s a short-term concern. And as a Fool, I’m not worried about that. Looking at the bigger picture, I think Burberry is well-placed to capitalise on the projected recovery in spending on luxury goods, especially in Asia. It’s no secret the region has a large population of a rapidly rising affluent middle class. Over 1bn people in China will be in the middle class in the next five years and many of those will be in the upper income bracket. This will no doubt provide Burberry with a boost.
Tesco
I’m also keen on retail giant Tesco (LSE: TSCO). Unlike Burberry, the stock has been on a surge recently. If I’d invested in Tesco 12 months ago, my investment would be up 28%.
That’s not bad at all. And that’s excluding its dividend, which currently sits at 3.8%. In April, Tesco also initiated a £750m buyback scheme.
An ongoing risk is rising competition, of course. This predominantly comes in the form of Aldi and Lidl. The German budget supermarkets have been growing in popularity in recent years. This has only been aided by the cost-of-living crisis as shoppers look to cut down on costs.
That said, Tesco remains the largest player in the field with a 27.2% UK market share. This gives it strong brand recognition. It also has an edge over budget rivals with a strong online business, which it’s taken action in recent times to improve through its digital marketing strategy.
It’s also focusing on growing its store presence. This includes Ireland, where it plans to spend €80m on eight new store openings.
I like the look of both stocks and think they could be long-term winners. I’ll be opening a position in each in the upcoming weeks.
