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2 FTSE 100 stocks I’d buy right now

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Thanks to possessing sizeable economic moats — be it in form of size, brands, barriers to entry or technical know-how — the shares of some companies can be held for decades. With this in mind, here are just two FTSE 100 stocks that I’d consider buying right now, particularly following recent price weakness. 

Back to form

The negative reaction to recent results from consumer products giant Reckitt Benckiser (LSE: RB) could be an excellent opportunity for new investors to begin building a position in the company.

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The £41bn cap returned to form in Q4, registering 2% growth in like-for-like net revenue following a strong flu season — not bad considering the company’s reference to trading in a “challenging, volatile environment“.

Elsewhere, the acquisition of Mead Johnson remains “firmly on track“, according to CEO Rakesh Kapoor. In addition to revealing that $25m of synergies had been achieved earlier than expected, Reckitt also raised its forecast for cost savings to around $300m — up to $50m higher than that predicted when the former was purchased. Looking ahead, two new units — Health and Hygiene Home — are also expected to “drive long-term growth” and help the company “leverage the structural shiftit is witnessing in the way people shop. So why have the shares dipped?

It seems that some investors became skittish as a result of profit coming in below the level expected by analysts and like-for-like growth looking more subdued going forward. The fact that the company remained tight-lipped on the possibility that it may bid for Pfizer’s consumer healthcare arm could be another factor. Hardly the stuff of nightmares though.

Thanks to its portfolio of ‘sticky’ brands and huge free cash flow, Reckitt remains a solid long-term pick in my opinion. While a forecast price-to-earnings (P/E) ratio of 17 for the current year might not scream value, it’s worth remembering that stock in consumer goods titans — with their defensive qualities — rarely comes cheap.

The consistent hikes to dividends shouldn’t be overlooked either. The total payout for 2017 was 7% higher than that returned to shareholders a year earlier. The fact that this year’s dividend (a forecast 173.5p per share) looks decently covered by profits is another bonus, particularly as some income stalwarts appear to be on shaky ground at the current time.

Drink up

Reckitt isn’t the only quality company whose share price has taken a hit in recent times. Somewhat unfairly, beverage giant Diageo (LSE: DGE) has seen its stock dip 10% since hitting fresh highs at the end of last year.

In January, the blue-chip reported a 1.7% increase in sales and 6.1% in operating profit over the first half of the current financial year, despite organic growth being held back by adverse exchange rates. Trading in Europe and Latin America was particularly robust and helped offset weakness in other markets, including India (where a new ban on alcohol being sold near state highways was introduced) and Korea.

Having already warned that growth in the 2017/18 financial year would be weighted to the second half, the company stated that it remains “confident” on being able to achieve consistent mid-single-digit rises in revenue going forward. That’s good enough for me. 

Changing hands for 21 times forecast earnings, Diageo’s stock isn’t cheap. Nevertheless, I continue to believe that the world’s largest spirits company’s status as a classic ‘bottom drawer’ stock remains undiminished.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo and Reckitt Benckiser. 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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