What Should You Buy And Sell In The FTSE 100?

Without the aid of a crystal ball, it’s nigh-on impossible to select the ‘correct’ stock in times of severe stock market volatility like these.

Such conditions can often see brilliant stocks, with hot growth potential, fall by the wayside, while firms with extremely poor earnings prospects — like oil and gas or mining, for example — can regularly see their share prices explode.  Indeed, operators in bombed-out sectors such as these can often deliver spectacular returns should the timing be right.

Veer away from volatility

Long-term shareholders in FTSE 100 stalwarts Anglo American and Glencore, for example, would be nursing share price falls of 64% and 59% respectively during the past 12 months due to enduring fears over the health of commodities ‘hoover’ China.

But someone investing in these companies a fortnight ago would be enjoying handsome returns — Anglo American has risen 35% during the period, while Glencore has advanced 16%.

Still, these chunky gains are down to nothing more than massive amounts of short-covering rather than signs of improving supply/demand balances in these firms’ markets. Engineer Rolls-Royce’s 20% advance since last week’s better-than-expected update has also been attributed to this phenomenon.

Indeed, a flurry of downgrades by the likes of Moody’s, Standard & Poor’s and Fitch in recent weeks illustrates the precarious footing for the world’s mining and energy giants.

Build a fortune

Sure, these firms may throw up more heady gains in the near future, but those riding the ‘volatility train’ are often left with empty pockets.

Rather, investors should be looking for long-term quality rather than short-term gains, and a smart investment strategy arguably sees investors looking to hold onto a stock for a minimum of five years.

One sector with excellent long-term prospects, I believe, is the housing segment. Just this week a report by Santander Mortgages estimated that average UK house prices should double to £557,444 by 2030, reflecting the combination of insufficient housebuilding activity and galloping demand.

This backcloth makes Barratt Developments, Persimmon and Taylor Wimpey hot stock selections, in my opinion, particularly as the recent ‘bear market’ makes these rock-solid firms dealing at dirt cheap prices. Barratt Developments currently sports an ultra-low P/E rating of 11.5 times for 2016, for example, as well as a market-mashing 4.9% dividend yield.

Shop around

And there are plenty of other FTSE marvels to be found for eagle-eyed investors.

Rocketing healthcare demand worldwide should make the likes of AstraZeneca and GlaxoSmithKline brilliant shares for the years ahead, I reckon, particularly as their reinvigorated product pipelines are really starting to deliver the goods.

Elsewhere, steadily-rising demand for cheap air travel and transatlantic voyages alike makes flyers easyJet and International Consolidated Airlines excellent long-term growth selections.

And for something completely different, the indispensable nature of ARM Holdings’ microchips for smartphones and tablet PCs — combined with the firm’s ambitious expansion in fast-growing areas like networking and servers — makes the Cambridge firm a must-have for tech lovers, in my opinion.

These are just a few examples of stock stars offered up by London’s blue-chip index, and I believe there are plenty more up for grabs for share selectors with a sensible and patient investment approach.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings, AstraZeneca, and GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.