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I’d buy these two FTSE 100 stocks for my Stocks & Shares ISA today

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Today I’m looking at two FTSE 100 stocks whose fortunes have been very different during the Covid-19 crisis. Melrose (LSE: MRO) is one, and at one point during the stock market crash its shares lost nearly 70% of their value. That’s recovered to only around 50% now.

Melrose buys up what it sees as undervalued companies, specialising in engineering and manufacturing. It then works on turning them around, and sells at a hopefully-much-improved valuation. The firm’s hostile takeover of GKN in 2018 is a good example of what it does.

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The FTSE 100 industrial sector’s troubles have hit Melrose. But things are looking up as the share price picked up 10% on Thursday. For the six months to 30 June, the company reported a pre-tax loss of £685m. But it puts the adjusted pre-tax loss figure at just £40m (from a positive adjusted operating profit of £56m).

Balance sheet

Considering the nature of the business, short-term profit figures don’t really show the big picture. I’m more interested in how Melrose’s debt situation looks during these hard times. And I find it reassuring. At the interim stage, net debt stood at £3,399m, only a little above December 2019’s level of £3,283m. Cash generation has been healthy too, with £213m in adjusted free cash flow.

As long as Melrose can make it through the Footsie downturn, which I’m convinced it can, I see a long-term buying opportunity here. Chairman Justin Dowley said: “Crucially, we own good businesses with significant improvement opportunities.”

In addition, with so many companies valued so lowly right now, there must be some tasty acquisition opportunities for Melrose too.

FTSE 100 safety

Speaking of acquisitions, my second pick today has just completed one. It’s Bunzl (LSE: BNZL), which counts food packaging, cleaning and hygiene supplies, personal protective equipment, and healthcare consumables among among the products it supplies.

That’s nicely defensive anyway. And demand for hygiene and healthcare supplies has given the firm a boost during the pandemic. The share price dipped along with the rest at the start of the crash. But it’s steadily recovered, and we’re now looking at a gain of 15% so far in 2020 — something that very few Footsie companies have managed.

In its latest update, the firm tells us it has “completed the acquisition of MCR Safety, a distributor of a variety of largely own brand personal protection equipment and other safety products based in the US.”

That’s sounds like a company that fits well with Bunzl’s wider business, and it’s got to be a good move for the long term.

Cash generation

Looking back at Bunzl’s interim figures from August, profit is increasing nicely. Adjusted pre-tax profit and adjusted EPS both rose 16%. And in these days when FTSE 100 dividends have been trashed, Bunzl maintained its interim payout. And how lovely it was to see the firm announce “the reinstatement of the 2019 final dividend of 35.8p per share as an additional interim dividend.”

Bunzl has raised its dividend for 27 years in a row now.

So we’re looking at one cash cow with what I see as a very safe and defensive future. And one recovery candidate that remains strong despite its share price slump. Two very different companies, and two I’d buy for very different reasons.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Melrose. 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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