A number of FTSE 100 shares have had an awesome run in 2024 so far. The index has reached record highs in the past couple of months. Even so, I think plenty of stocks still look like savvy buys.
That said, while I like the look of a number of Footsie constituents, not all take my fancy. If I had the cash, here’s one I’d buy today and one I’d avoid.
An AI play
Let’s start with a stock I’m eyeing: London Stock Exchange Group (LSE: LSEG). It’s up 3.6% this year, slightly less than the FTSE 100 (5.9%). But zooming out, the financial markets data stalwart is up 14.1% over the last year and 64.7% in the last five.
I like the stock due to its strong market position. It provides data to 99 of the top 100 global banks.
But there’s actually another reason why I want to add it to my portfolio. It recently announced a 10-year partnership with Microsoft, which will see artificial intelligence (AI) play a larger role in the products and services it provides.
As part of the deal, Microsoft took a 4% equity stake in the business. The move is “expected to increase LSEG’s revenue growth meaningfully over time as new products come on-stream“.
The stock does looks expensive. It’s trading higher than the FTSE 100 average. The financial data sector can also be highly competitive, which is another risk.
But as a long term buy-and-hold, I’m bullish on the stock, especially if it continues to expand further into the AI sector.
What’s more, while on the surface it may not look like your typical income stock, with its payout having grown at an annual compound growth rate of 14.6% during the last decade, there’s certainly potential for its 1.2% dividend yield to keep rising.
A value trap
One stock I plan to avoid like the plague is Vodafone (LSE: VOD). The stock is up a mere 0.2% year to date. It’s down 2.7% over the last year. But the telecoms giant has lost 45.9% of its value in the last five years.
At 59.9p, its shares may now look like a steal. And with it making some progress with its turnaround strategy, investors may be tempted to dive in.
The business continues to streamline after offloading its Spanish and Italian businesses for €5bn and €8bn, respectively. It also has plenty of potential for growth in exciting regions like Africa.
But there are a few reasons why I’m steering clear. Firstly, it has an alarming amount of debt (€33.2bn) on its balance sheet.
Secondly, its 10.9% yield looks tempting but is set to be cut in half next year from 9 cents a share to 4.5 cents. Its current payout is unsustainable. Its new yield will still be above the FTSE 100 average. Yet there’s always the risk it could be cut again further down the line.
With its poor share price performance over the last five years, I’m wary the stock could be a value trap. For that reason, I wouldn’t buy it today.
