When it comes to searching for attractive FTSE 100 shares to buy today, it’s common for investors to worry about another stock market crash.
But I’d aim to overcome such fears by shopping for shares as Warren Buffett does. He’s well known for approaching his stock purchases with a business perspective. In other words, he considers himself to be a part-owner of the underlying business. And that means the most important thing to him is whether the business is a good one and whether the price he’s paying makes sense of the investment.
How I’m hunting for FTSE 100 shares to buy today
I watched an old interview with Buffett recently and he talked about ignoring the share price and the stock market after he’d made his purchase. Indeed, he reckoned he’d only buy shares in a business if he was happy to own them even if the stock market closed for five years. One technique he uses to help him decide whether to buy shares is to form his own opinion about what the business is worth. Then, he checks the stock price to see if the market agrees or whether it is over-valuing or under-valuing the business.
So, I reckon it’s a good idea for me to build a watchlist of great companies I’d like to own. In the FTSE 100, I’d go for businesses that have defensive, cash-generating operations. And they’d need resistance to the ups and downs of the general economic cycle. Indeed, I want my stocks to become compounding machines in my portfolio. And I think that’s harder to achieve with out-and-out cyclical outfits such as banks, retailers and construction companies and oil firms.
Meanwhile, I think a window of opportunity has opened up recently with defensive companies. Covid-19 vaccine news hit the newswires in November. And I think it prompted a sudden rotation of investors’ money out of defensives and into cyclicals. Those chasing recovery in the cyclicals appear to have left defensive stocks languishing. So maybe there’s better value to be had now for investors with a long investment horizon in mind.
Shares at the top of my list
Right now, I’d run the calculator over pharmaceutical and medical businesses such as AstraZeneca, GlaxoSmithKline and Smith & Nephew. The sector is a well-stocked hunting ground for defensive businesses, ideal for a long-term, buy-and-hold investment strategy. As is the fast-moving consumer goods (FMCG) sector. And lately, there’s been weakness in the share prices of other great companies. Think of premium alcoholic drinks giant Diageo and multi-product operators such as Unilever and Reckitt Benckiser. And smoking products firms such as British American Tobacco and Imperial Brands look particularly cheap right now.
I’d also head for the utilities sector and consider owning shares in energy supplier SSE and water company Severn Trent. Meanwhile, paper-based packaging supplier Smurfit Kappa is a share I’d like to own because it serves the supply chain of the attractive FMCG sector. And I also think business accounting software specialist Sage and distribution and services company Bunzl have defensive qualities.
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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended Diageo, GlaxoSmithKline, Imperial Brands, Sage Group, and Unilever. 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.