The FTSE 100 has gained over 12% since last week as a relief rally got under way yesterday. A Biden bounce and Pfizer’s coronavirus vaccine have turned investors bullish again. If you have so far stayed away from stock markets that just don’t get anywhere fast, I don’t blame you. But I reckon now can be a tempting time to consider buying FTSE 100 shares for the first time. Here’s how I’d invest my first £500 now.
The Footsie fallers
There’s more than one FTSE 100 stock to choose from, but the ones I like most are those that have fallen in the past few days as investors shrugged off caution. As a result, high-performers from earlier this year have suddenly seen a drop in share price. One example is the London Stock Exchange Group. Its financial performance has been strong as have been its dividend payouts. But in the past few days, its share price has dropped sharply – since the past week alone it’s down over 5%. I reckon that it will pick up in the days to come, so the best time to buy the stock is now.
Another one is the grocery e-tailer Ocado, whose share price fell by an even higher 10% over the past week at the time of writing. I don’t think the correction is here to stay, though. Despite the vaccine discovery, there are still hurdles to cross before it becomes readily available. It’s possible that might not happen in a hurry. In any case, the future of shopping is well acknowledged to be online. So, the setback to FTSE 100 company Ocado’s share price will be temporary in my view.
Another gainer from the lockdowns – Just Eat Takeaway – is facing a similar share price decline now. Like Ocado, there’s nothing not to like in it. It’s just that with the hope of a vaccine now becoming a real possibility, beaten-down stocks are now fundamentally more attractive than those that have already run up quite a bit. However, I think JET is due for a bounceback. I had last written about it in June, when its share price had plunged 18% on its acquisition of the US based Grubhub. It was only a matter of time before it started rising again. With no other impetus other than broader market reaction for the latest fall, I think this trend is going to repeat itself.
The FTSE 100 gainers
I think stocks of sectors that have suffered the most like entertainment, travel and hospitality are also due for a sharp revival. In fact, it’s already under way. It’s no coincidence that British Airways owner, International Consolidated Airlines Group, is also the biggest gainer in today’s trading. Its share price has risen 30% in the past week alone. I think that if the Covid-19 medication related news continues to generate positive updates, these stocks will continue to gain as well, but they are a somewhat more risky bet than the fallers.
Manika Premsingh owns shares of Ocado Group. The Motley Fool UK has recommended Just Eat Takeaway.com N.V. 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.