The FTSE 100‘s been surging in 2024. Up 6.2% so far this year, including a 1% rise in May, I’m optimistic for June and the months ahead.
As such, I’ve been scouring the index for potential stocks to snap up. Here are two top-quality businesses that have caught my attention. I think investors should consider buying them today.
Tesco
My first selection is Tesco (LSE: TSCO). Like the Footsie, it has had a strong start to the year. Its share price has climbed 7.2%. In the last 12 months, it’s up an impressive 19.8%.
But I think Tesco stock has more to give. There are a few reasons I like it as a long-term play today.
Firstly, it’s a defensive stock. Come rain or shine, demand for the products it sells will always be there. After all, regardless of issues such as choppy economic conditions, people need to eat and drink. We saw the benefit of this in its latest annual earnings release, where group sales, excluding VAT an fuel, rose 7.2% for the 52 weeks to 24 February.
Of course, it’s not quite as easy as that. And despite constant demand for its products, it’s faced competition in recent times. This has come largely from budget supermarkets such as Aldi and Lidl. In the past few years, especially given the cost-of-living crisis, they’ve become more popular than ever.
But Tesco’s still the largest player in the space with a 27.4% market share. The closest to that is Sainsbury’s with 15.3%. Its dominant position gives it an edge over its rivals, such as being able to benefit from economies of scale.
To go with that, there’s also the opportunity to make some passive income with its 3.9% dividend yield. That’s just above the Footsie average. For 2023, its dividend rose 11% year on year to 12.1p.
GSK
My second selection is GSK (LSE: GSK). It’s also benefitted from the Footsie rally, rising 19.3% year to date. It’s up 28.7% in the last 12 months.
Like Tesco, I’m bullish on GSK given its defensive nature. The company delivers over 1.5m doses of its vaccines every single day. Just like with food and drink, people need medicines and treatments regardless of how the economy’s performing.
On top of that, the stock also offers passive income. It yields slightly lower than Tesco, at 3.3%. However, looking forward, its yield is expected to rise to keep rising.
There are a few risks I see. Firstly, pharmaceutical companies have to invest millions into R&D to bring drugs and treatments to market, with the risk that it doesn’t pay off. In recent times, there have also been concerns over the depth of GSK’s drug pipeline.
But with the firm recently announcing it has around 90 products in its R&D pipeline, I’m confident that the years ahead will see sales begin to pick up again. What’s more, the stock looks like good value for money, trading around 15 times earnings. I think now could be a shrewd time consider buying.
