I’m always keeping a close eye on the movement of FTSE 100 shares. Right now, I see plenty of bargains on the UK’s leading index. If there’s value to be had, I don’t want to miss out.
I think the Footsie is a great place for investors to focus their attention. It offers both beginners and seasoned retail investors the opportunity to bulk out their portfolio with high-quality blue-chip stocks.
Since its inception in 1984, the FTSE 100 has returned around 7% per year on average. That’s not bad at all. But I want to try and beat the market. Here are two shares I think could help me do that. If I had the cash, I’d snap them up today.
HSBC
Global bank HSBC (LSE: HSBA) needs no introduction. The stock had a stellar 2023. And I think it could keep rewarding shareholders in the years to come.
The biggest risk I see with HSBC is its exposure to Asia. Ongoing political tensions with the West have the potential to impact the firm. Its exposure to China, where it’s heavily invested in the property market, could also be an issue given the sector’s recent wobble there.
However, that’s a short-term concern. I buy for the long hold. And that’s why I see value in HSBC’s interest in Asia. The commercial banking sector in Asia is set to grow at a compound annual growth rate (CAGR) of nearly 20% between now and 2031. That’s why HSBC has earmarked $6bn for investment in China, Hong Kong, and Singapore to 2025. I expect greater investment in the years to come.
On top of that, the stock looks cheap. Trading on just 5.4 times earnings, that’s over half that of the FTSE 100 average. It’s also cheaper than a host of its peers, including names such as Lloyds (7.6).
With HSBC, there’s also the opportunity for me to generate extra cash through its 5.6% dividend yield. Of course, dividends are never guaranteed. But that yield, coupled with the cheap valuation and potential for growth, means I’m bullish on the long-term future of the stock.
Tesco
Another stock I’m watching like a hawk is Tesco (LSE: TSCO). Like HSBC, it posted strong gains in 2023. I’m hopeful it can keep up its fine form.
At 3.7%, Tesco’s yield sits roughly in line with the FTSE 100 average. However, it’s looked to give back to shareholders, most recently through a share buyback scheme set to finish in April this year.
What I also like about Tesco is its brand recognition. At 27.2%, it holds the largest share of the market. That gives it an upper hand over its rivals. Furthermore, the business has ambitious expansion plans, both via physical store openings and its online presence.
That said, the largest threat it’ll face is the rise of budget competitors. Aldi and Lidl have experienced aggressive growth in the last few years, especially through the cost-of-living crisis. Nevertheless, Tesco’s latest trading update highlighted that like-for-like sales jumped 9.2% in the four weeks before the festive period. That’s strong momentum to take into 2024.
At 298p, I’m bullish on the long-term outlook for Tesco. I’ll be happy to pick up some extra cash along the way.
