Don’t waste the stock market crash! 3 FTSE 100 shares I’d buy to retire early

While many investors are fleeing, Roland Head thinks these three FTSE 100 shares could deliver market-beating gains over the next few years.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The stock market crash has left many of us facing big losses in our portfolios. Of course, it’s only a loss if you sell. Share prices often recover strongly after a crash. That’s why I’ve been searching the market for FTSE 100 shares that could be bargain buys.

In this piece, I want to look at three FTSE stocks I’d be very happy to buy at current levels.

This 10% yield looks safe to me

Legal & General Group (LSE: LGEN) has been an excellent performer in recent years. This £11bn firm has consistently generated strong cash flows and a return on equity of more than 20%. These qualities have supported a generous dividend, which has risen by about 6% each year.

Investors are now worried that big insurers like Legal & General might be forced to follow that banks’ lead and cut their dividends. Personally, I’m not sure this is really justified. L&G and its peers seem to have pretty strong balance sheets. I think the impact from coronavirus should be limited.

In any case, I think a fair amount of bad news is already reflected in the share price. The LGEN share price has lagged the index in 2020, falling 45% compared to 30% for the FTSE 100. The shares now trade on just 6 times earnings, with a forecast dividend yield of 10%. I rate this FTSE 100 share as a good long-term income buy.

A FTSE 100 share I’d hold forever

My next pick has managed to stay ahead of the index during the market crash. I’m not surprised. In my view, healthcare group Smith & Nephew (LSE: SN) is a much safer bet than many other companies in the index.

The group’s main business is making replacement joints for the world’s ageing population. Sales are suffering as a result of coronavirus, which has caused non-emergency operations of this kind to be widely postponed.

However, the world’s population is getting older and wealthier. I don’t see COVID-19 changing this trend, so I expect demand to recover after the pandemic. It’s worth noting that business in China is already said to be returning to normal.

This FTSE 100 share rarely looks cheap, but Smith & Nephew is very profitable and doesn’t have much debt. With the shares now trading on 16 times forecast earnings and offering a 2.3% yield, I think this stock is priced to buy.

Dig deep – this FTSE 100 share will survive

My final pick is mining and oil group BHP (LSE: BHP). The firm’s shares have suffered more than some of the other big miners, thanks to the group’s exposure to the crashing oil price.

However, it’s this diversity that attracts me to BHP, which also has low-cost mines producing iron ore and copper. I see this business as a low-risk way to generate an income from commodities.

This business has a consistent focus on dividends and is large enough to survive almost any storm. Management have cut debt and controlled spending carefully in recent years, leaving the firm with strong cash flows and a flexible outlook.

The market crash has left BHP shares trading on just 8 times 2020 forecast earnings, with a dividend yield of 8%. Although I can see some risk that a global slowdown might hurt the firm’s profits, I think BHP is cheap and strong enough to be an excellent long-term buy at this level.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland Head owns shares of BHP. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

How I’d invest my first £20k ISA to target £4,900 a year from dividend shares

Looking for dividend shares in a new Stocks and Shares ISA, and want diversification too? Here's how I'd go about…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »