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2 hot FTSE 100 stocks I’d buy in February

The FTSE 100 has been exceptionally volatile in 2017. At its height, it has been up by as much as 2.8% as it surpassed previous all-time highs. However, in recent days it has slipped back to trade at exactly the same level as which it started the year. It looks as though this highly volatile few weeks will continue throughout February and possibly during the remainder of the year. While it may make many investors unsure about buying shares, now could prove to be the right time to buy these two FTSE 100 companies.

An evolving retailer

Tesco (LSE: TSCO) is quickly becoming a very different business to that which current CEO Dave Lewis inherited. Previously, it had set its sights on becoming a global retailer through US expansion and growth opportunities in Asia. Furthermore, it had sought to diversify into a wide range of activities including film rental and technology products. However, it’s now focused on getting back to food basics and its acquisition of Booker would be another move in that direction.

The combined company could become an even more dominant food retailer in the UK. It could enjoy size and scale advantages over rivals, while also generating efficiencies over the medium term. Even without the potentially positive impact of Booker on Tesco being included, the company is forecast to record a rise in its bottom line of 31% next year, followed by 32% the year after. Despite this, it has a price-to-earnings growth (PEG) ratio of only 0.5, which indicates that it offers excellent value for money.

Tesco has previously been considered a turnaround play by many investors. While it’s not yet turned around, it’s well on course to delivering rapidly rising profits. As such, now could be the perfect time to buy it.

A safe pair of hands?

Brexit is likely to be a dominant news story this year, so it’s important to consider which companies could be negatively impacted if talks between the UK and EU turn sour. One company which has stated that Brexit is unlikely to have a significant impact on its financial performance is Aviva (LSE: AV).

The life insurer currently trades on a price-to-earnings (P/E) ratio of only 9.6, which indicates that it offers a wide margin of safety. This is somewhat understandable given the fact it’s currently integrating Friends Life into its business and this entails a degree of risk. But given the company’s growth outlook, such a low rating is difficult to justify. For example, Aviva is forecast to record a rise in its bottom line of 13% this year and 6% next year, which means its earnings should rise at a faster rate than those of the wider index.

Added to this is a yield of 5.5%. With dividends covered almost twice by profit, there appears to be sufficient headroom for Aviva to raise shareholder payouts in future. For long-term investors, buying high quality stocks at low prices is usually the main aim of investing. Aviva is a company that appears to firmly tick both of those boxes.

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Peter Stephens owns shares of Aviva and Tesco. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.