2 world-class FTSE 100 shares I’ll buy with spare cash in March

Ben McPoland takes a look at a pair of high-quality FTSE 100 shares that he intends to add to his Stocks and Shares ISA.

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I try to add money to my Stocks and Shares ISA every month to help my wealth grow. My preference is to add both growth and income stocks, though I’ll invest wherever I see potential value. In March, these are the two FTSE 100 shares I’m buying with spare cash.

#1. London Stock Exchange Group

The first stock on my want list is London Stock Exchange Group (LSE:LSEG). The share price is up nearly 20% over the last year.

Despite what the name might suggest, this is actually a global financial data company. In fact, less than 4% of the company’s annual revenue is now generated from the exchange business.

Most profits come from its data and analytics businesses following the $27bn acquisition of financial information provider Refinitiv. It’s now a global leader in multiple asset classes, including foreign exchange and fixed income.

In late 2022, the Group signed a 10-year partnership with Microsoft to develop generative artificial intelligence (AI) tools. Trained upon its huge datasets, the company’s forthcoming AI products should be top-tier.

Microsoft also took a 4% stake in the firm, which is very encouraging.

Valuation

London Stock Exchange Group’s real-time financial data is critical to over 40,000 customers (banks, hedge funds, asset managers, etc). Access to this information is on a subscription basis, generating steady and recurring revenue.

Business models like this tend to be highly valued by investors, and we see that here. The stock is trading at 27 times earnings. That’s a premium to the wider UK market and could leave the shares vulnerable to a pullback if profits come in light.

Today (29 February), though, the Group reported that total income excluding recoveries rose 8.3% last year to around £8.38bn. Its guidance range was 6%-8%.

Earnings per share (EPS) edged 1.9% higher to 323.9p, but was slightly below what analysts were expecting. However, this minor miss doesn’t concern me and I still intend to invest.

#2. HSBC

Next up is Europe’s largest bank: HSBC (HSBA). I invested just before the shares plummeted 8% on 21 February following the company’s fourth-quarter earnings.

The reason was an unexpected $3bn impairment charge on its stake in a Chinese bank exposed to the country’s long-running property crisis.

There’s a risk this meltdown could worsen, along with HSBC’s exposure to it. Management thinks the property sector has already bottomed, but nobody knows for sure yet.

Beyond this, though, 2023 taken as a whole was excellent. The bank generated a pre-tax profit of $30.3bn, up 78% from 2022. The board also announced a new $2bn share buyback programme.

Since the earnings, I note the shares have started to creep back up, going from 589p to 614p. So I’m keen to grab some more shares in case they fully recover (I think they will).

Currently, the forward dividend yield is around 7.5% (excluding an upcoming special dividend), then jumps to 8% in 2025. While dividends are never certain, these prospective payouts are well-covered by anticipated earnings.

Looking ahead, I expect the bank’s increasing focus on China and Asia to pay dividends (literally). The region is expected to boom in the decades ahead as middle classes expand and prosper. And HSBC will be there to serve them.

As such, I’m going to double down on this fantastic income stock in March.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Ben McPoland has positions in HSBC Holdings. The Motley Fool UK has recommended HSBC Holdings and Microsoft. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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