If you’re looking for SIPP investing ideas, you’re in the right place. My SIPP is my ticket to a happy retirement. That’s why I treat SIPP investing differently than my Stocks and Shares ISA.
I’m going to hold these FTSE 100 shares for 30 years. So quality is king. Add value on top, and I have myself a winning combination. Lower price-to-earnings ratios are generally better, as long as we’re talking about quality companies.
SIPP investing ideas
I’d prefer to pay bargain prices for my FTSE 100 shares, if possible.
“Whether it’s stocks or socks, I prefer buying merchandise when it’s marked down,” says Warren Buffett.
So first on my list of SIPP investing ideas is Royal Dutch Shell (LSE:RDSB). This quarter’s dividend yield has been cut for the first time since World War II. The company reported a net loss of $24m in Q1 2020 compared to a $6bn profit for the same period in 2019.
So some long-term holders have deserted the ship. But I see this a relatively short-term weakness. At these bargain basement prices I’m jumping aboard.
I’m convinced that with Shell’s gargantuan earnings power, the dividend will return.
Shell’s P/E ratio is in single figures for the first time in years. It now stands at 8.1. That’s well below the average P/E ratio of all FTSE 100 shares of 13.2, and far beneath the forecast average of 17.4.
I was annoyed to miss the P/E dip under 12 times earnings for my SIPP in late 2018. But my opportunity has finally come around again.
Mining for treasure
Next up in my SIPP investing ideas is Anglo American (LSE:AAL). It’s another blue-chip giant with a P/E ratio of 7.2. This single-digit price tag is the cheapest it has been since 2017. And yet the South African multinational miner has been recovering strongly from the Covid-induced market crash.
Quality is evident. Its sales per share have been growing strongly for the last five years, up from £10.29 per share to £18.24 in 2019. All the while AAL has been deleveraging its balance sheet, cutting its debt-to-assets ratio from 58% in 2015 to 44% last year. Return on capital and equity are both extremely strong, and its operating margin of 20% can’t be easily bettered.
It has large interests in diamond mining through its De Beers subsidiary, along with large copper mines in Chile and Peru. At a market cap of £24.2bn and sales of £23.7bn, there’s also value to be had here.
Take a SIPP of this
The last of my SIPP investing ideas is Aviva. I’ve long been an Aviva holder, and I’ve been pound-cost averaging into the insurer since the crash.
Want proof of its quality? When FTSE 100 shares rebounded on (perhaps undue) optimism, Aviva started flying upwards. So I’m convinced picking it up on weakness today will yield superstar compound growth in future.
Value-wise, there’s a lot to love. Sales of £70bn on a £10bn market cap is one handy figure. A price-to-book value of 0.64 is tiny given the size of the company.
At a P/E ratio of just 4.4, this is perhaps the biggest bargain of them all. It has warned of a £160m Covid-19 payout to businesses. That sounds like a lot of money. But when you consider last year’s profits were £3.9bn? A drop in the ocean. I’d buy it every day of the week if I could.
Tom Rodgers owns shares in Royal Dutch Shell and Aviva. 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.