The bear market that we’re in is likely to throw up some amazing opportunities for long-term investors. In the days and weeks ahead, volatility could remain high. But those buying stocks while share prices are low should be rewarded in the long run.
With that in mind, here’s a look at two FTSE 100 stocks I’d like to buy more of while the market is depressed.
One stock I definitely want to buy more of in the current bear market is the world’s largest spirits maker, Diageo (LSE: DGE). Diageo owns a fantastic portfolio of brands including Johnnie Walker, Tanqueray, and Smirnoff. In my view, DGE is one of the most attractive stocks in the entire FTSE 100. It has a brilliant long-term track record of 21 consecutive dividend increases. It also has an attractive growth story, as it’s poised to benefit from the rising level of wealth in emerging markets.
I do expect the coronavirus to impact Diageo, given that bars and pubs in many countries have been closed. Rival Pernod Ricard – the world’s second-largest international spirits maker behind DGE – warned earlier this week that it is likely to take a hit of around 20% to its current operating profit.
However, I believe the setback will be temporary. Eventually, we’ll get through this challenging time, and alcohol sales will pick up again. Importantly, the long-term growth story associated with the aspirational nature of emerging markets consumers remains intact.
Diageo shares fell to near 2,000p earlier this week, a level not seen since 2016. At that price – which equates to a trailing price-to-earnings ratio of less than 16 – I think the stock is a steal. I’m hoping it falls back to those levels again so I can add to my position at a bargain price.
St. James’s Place
Another FTSE 100 stock that I’d like to add to in this bear market is wealth manager St. James’s Place (LSE: STJ). Like Diageo, it has a great long-term track record, having registered 16 consecutive dividend increases. It also has an attractive growth story – demand for trusted face-to-face financial advice should remain strong in the years ahead as the UK’s Baby Boomers retire and access their pensions.
The recent stock market crash to impact near-term profits at St. James’s Place, as the company’s fees are linked to the size of its clients’ portfolios. The current UK lockdown is also likely to have a negative effect on the group’s ability to generate new business. This will certainly be a setback for the company in the short term. However, I do not expect the coronavirus outbreak to have a long-lasting impact on the company. If anything, the elevated stock market volatility we have seen recently could increase demand for trusted financial advice.
STJ shares have taken a beating recently in the stock market crash, falling from near 1,200p to around 750p. At that level, which equates to a trailing P/E ratio of less than 15, I believe there’s a lot of value on offer for long-term investors.
It’s ugly out there…
The threat posed by the coronavirus outbreak has spooked global markets, sending stock prices reeling.
And with the Covid-19 virus now beginning to spread beyond of China and Italy, it seems very likely that the bull market we’ve enjoyed over the past decade could finally be coming to an end.
Against such a backdrop of market worry, it’s little wonder that many investors are starting to panic. (After all, nobody likes to see the value of their portfolio fall significantly in such a short space of time.)
Fortunately, The Motley Fool is here to help, and you don’t have to face this alone…
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Edward Sheldon owns shares in Diageo and St. James's Place. The Motley Fool UK has recommended Diageo. 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.