Something I keep having to remind myself of is the fact that investing is for the long term. With the volatile markets we’ve seen over the course of 2020, this is even more important. The FTSE 100 can move 5% higher or lower in a single day. These short-term movements can cause investors to either sell out too soon, taking a premature profit or solidifying a loss. I’m always trying to look at the FTSE 100 stocks I can buy with a holding period of five years or more. If I had £1,000 to deploy right now, here are two that I’d consider.
A banking turnaround
Over the course of this year I’ve been firmly in the camp that thinks the banking sector is undervalued. To this end, I’d look to buy in to Barclays (LSE: BARC). I’d target it specifically as other FTSE 100 rivals have company-specific problems. HSBC is still going through a global restructure, and Lloyds Banking Group has a very large UK retail focus. Barclays is a good halfway-house in my opinion for those looking at the sector.
The FTSE 100 stock is already starting to see a turnaround in its fortunes. Q3 results showed that the provisions made for bad loans were down 63% from the previous quarter. The diversified set-up of the bank also means the struggling retail arm can be offset by the corporate and investment arm. This side showed growth in income of 24% year-to-date versus the same period last year.
With my time horizon of five years, I think this allows me to buy in at a good time right now. Barclays stock would need to rally another 25% from current levels to reach the same price as seen in January. So I feel it’s a good discount at which to buy the FTSE 100 stock now and to hold for the potential turnaround over the coming years.
A FTSE 100 stalwart stock
Diageo (LSE: DGE) has been traded on the LSE for several decades. It sits in the FTSE 100 with a market capitalisation of over £67bn, and owns some of the biggest household beverage names. These include Guinness, Johnnie Walker, Baileys and Smirnoff. If I’d got £1,000 to invest right now for the long term, this would be one of my top picks.
The pandemic has impacted the business, with net sales down 8.7% over the course of the 2020 financial year. But I feel this is just a short-term blip that offers me another discount to be able to buy in at. This is because the company sells predominately alcoholic brands. These have shown low fluctuations in demand over many years, as consumers have a fairly constant need. This demand is truly global as well, with the top six brands giving Diageo over £16bn worth of revenue in the year, accounting for 39% of global sales.
To me, the grip that Diageo has in owning and marketing these top brands will ensure that financial dips in performance will never be over a long period. So I’d look carefully to consider buying the FTSE 100 stock now, as a safe investment for the next five years and beyond.
jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, Diageo, HSBC Holdings, and Lloyds Banking Group. 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.