Have £1,000 to invest? Here are 2 FTSE 100 shares I’d buy in an ISA today

These FTSE 100 shares could deliver reliable profits for many years to come. Roland Head explains why he thinks you should be buying these stocks today.

| 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.

Making money from stocks doesn’t have to be complicated. I reckon that all you have to do is buy good quality FTSE 100 shares, put them into a tax-free Stocks and Shares ISA, and leave them alone.

This is pretty much the approach that’s taken by top UK fund managers such as Nick Train and Terry Smith. It’s definitely what I’d do if I was investing £1,000 in the UK stock market today. Here are two FTSE stocks that are on my shopping list today.

Retail superhero

Sometimes there’s one company that stands out from the crowd. In UK retail I think that company is FTSE 100 fashion retailer Next (LSE: NXT). Although the firm is widely associated with high street retail, Next now makes more than half its profits online.

Indeed, the company already has a plan to go 100% online if its stores become too costly. However, this doesn’t seem likely to me just yet.

Rents have been falling in recent years and the stores are still making money. Shops are also an important part of Next’s online delivery and returns service. Nearly 50% of orders are collected from stores, while 80% of returns are made through stores. This seems to be a service that’s valued by customers, but isn’t available from online-only retailers.

The Amazon of fashion?

Next isn’t just selling its own stock online anymore, either. The firm’s online marketplace now stocks branded goods from a huge range of other brands, supporting the group’s continued online growth. I’m starting to think of this FTSE 100 share as the Amazon of UK fashion.

The only question mark about Next in my mind is whether the group will be able to maintain steady earnings growth in future years. I don’t have a crystal ball, but I’m willing to trust management who have delivered for shareholders over many years.

As I write, Next shares are changing hands for 15 times next year’s forecast earnings. I don’t think that’s too bad for a company with a 20% operating margin and little debt. I’d buy the shares for a long-term portfolio.

This FTSE 100 share is dull but profitable

My next choice is a company you may not have heard of. Mondi (LSE: MNDI) is one of the world’s largest packaging businesses, with sales of around €7bn each year.

The company’s product range covers pretty much every type of packaging, from heavyweight cardboard through to more technical items such as “release liners” and “barrier coatings”.

During the first half of the year, widespread global lockdown caused some disruption to Mondi’s operations. But the firm says that strong demand for consumer goods and ecommerce packaging helped to offset weaker demand in industrial markets.

Overall, it wasn’t such a bad start to the year. Although pre-tax profit fell by 26% to €466m, the business still showed attractive profitability with, a return on capital employed of 17%. That’s well above average for a FTSE 100 share.

Packaging stocks are unloved at the moment as investors fear that a global recession could cause demand to slump. I think these fears may be overdone. Mondi looks good value to me on 12 times 2021 forecast earnings, with a dividend yield of 4%. I see this as a stock to buy and hold.

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.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK owns shares of Next and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. 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

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 »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »