The FTSE 100 hasn’t had the best start to the year — since 29 December, it is down 2.2%. However, the Footsie‘s daily oscillations don’t bother me as a long-term investor. I want a ‘fire and forget’ portfolio packed with truly great companies to deliver superior returns over time.
Two Footsie powerhouses for 2024?
For example, here are two FTSE 100 stocks that we own, but would gladly buy again in 2024, given sufficient investable cash.
1. Diageo
Shares in drinks giant Diageo (LSE: DGE) drifted downwards throughout 2023. Then they fell sharply after a weak trading update on 10 November, when the group warned of lower sales in Latin America and the Caribbean.
This sent the shares down 395p that day (-12.2%), with the price also hitting a 52-week low of 2,719p. Over one year, this stock is down 24.8%, but up 1% over five years.
Last week, my wife and I bought this stock, paying 2,783.5p a share. As I write, the shares trade at 2,780p, valuing this global Goliath at £62.2bn.
Why did we buy Diageo? First, as the eighth-largest business in the FTSE 100, it’s huge. Second, it has a simple business model, selling over 200 brands of alcoholic drinks to billions of drinkers worldwide.
Third, its shares offer a dividend yield of 2.9% a year to collect while I wait for sales growth to resume. Fourth, in April 2023, the share price was £10 above the current price — and I’m hopeful of a return to these levels.
Of course, I could be wrong. Diageo’s regional sales growth could take further knocks this year, driven down by reduced drinking among the under-30s. Also, its premium and high-end brands could be hit by a global economic slowdown or recession.
Even so, I’m delighted to board the Diageo bandwagon for the long term. Cheers!
2. Unilever
Unilever (LSE: ULVR) is in much the same boat as Diageo. Thanks to slowing sales growth and margin pressures, its shares had a tough 2023. Over one year, they are down 9.6%, plus they have lost 5.8% over five years.
Unilever sells a host of popular brands found in kitchen cupboards and bathrooms worldwide. In fact, one in three households uses Unilever products daily. That’s the kind of global dominance I admire.
My investing hero, billionaire and philanthropist Warren Buffett once remarked, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”. This Buffett quote and others prompted me to buy into this European consumer-goods colossus.
My wife and I bought this stock in August 2022 for 4,122.2p a share. The share price is now 3,822.5p, 7.3% below our entry price. This values this business at £95.7bn, ranking it at #4 in the FTSE 100.
At current price levels, the shares trade on a multiple of 13.7 times earnings, well short of Unilever’s usual premium to the wider market. Also, the dividend yield has risen to nearly 4% a year — and it’s been a long, long time since I’ve seen Unilever’s cash yield above this mark.
Then again, like Diageo, Unilever’s sales growth has been stunted in this cost-of-living crisis. Also, consumers may continue to trade down to cheaper brands. But despite these pressures, I expect 2024 to be better than 2023.
