New to investing? I’d buy this FTSE 100 share to kickstart my portfolio

This FTSE 100 share is suitable for any new investor as I believe it offers strong turnaround potential, says Fool Noah Riley.

| 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.

Taking the dive into investing can be one of the hardest and biggest decisions that you make in life. It is also quite daunting in many ways, as there are numerous different asset classes that can be utilised when investing. However, I still believe that the FTSE 100 contains many great value shares. 

This new year can offer a fresh start, particularly for those who haven’t yet started investing. Stock-picking can potentially give investors a source of passive income (through dividends) and also deliver strong capital gains. The stock I outline in this article offers both in my opinion.

Getting started 

With the markets having bounced back hard from the March 2020 lows, it may appear to be the wrong time to start investing into equities. Even though the FTSE 250 is nearing pre-Covid levels and the US market has broken all-time highs, the FTSE 100 still appears very undervalued. I believe there is plenty of opportunity out there, even though there are also more risks as well. 

Whilst it is always important for any investor to get diversification in their portfolio, I believe it is also important to get exposure to stock picking and individual equities too. Diversification can be achieved through buying Exchange Traded Funds (ETFs), which are baskets of shares that follow specific market indices. These are generally known to be a lower-risk option than investing in individual equities. However, I also believe many equities in the FTSE 100 offer low risk at current levels, one of these being BT Group (LSE:BT-A).

BT Group

BT Group’s share price has been declining for many years. At its highest point back in 2000, BT shares surpassed £10 during the dot-com bubble; now they stand at just £1.35. 

A lot of the FTSE 100 company’s poor performance can be attributed to the prolonged mismanagement of operations. BT has, for a long time, had a near monopoly on broadband across Britain, but did not use this to its advantage and other entrants have grown market share. 

Instead of investing heavily into new fast fibre and onboarding customers for the long run, BT turned towards multi-billion pound TV sports deals and international partnerships, neither of which has arguably paid off to date.  

The future opportunity 

Now, with sentiment low, there is a turnaround opportunity in BT shares. The company still remains a cash cow delivering an operating profit of £3.5 billion for 2020, leaving BT with a lucrative P/E of just 5x. Whilst BT’s debt pile is sizable at £27 billion, the company has 4x coverage on the interest bill through its operating profit, so this debt is more than manageable.

With the world becoming increasingly integrated and demand for broadband services booming, I believe BT is one of the most promising FTSE 100 shares. BT’s recent move to plough £12 billion into rolling out fibre in the UK should put the company in good stead to reduce debt and improve cash flows. Whilst no dividend was paid at 2020 year end due to Covid-19 headwinds, I am confident dividends will return as cash generation improves going forward. As a result, BT is an investment I would consider if I was new to investing.

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.

Noah Riley holds no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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

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

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 FTSE income stocks investors should consider buying in April

Income stocks are a great way to build wealth. Our writer details two picks she believes investors should consider snapping…

Read more »

Investing Articles

What might the 5-year price chart tell us about BT shares?

Christopher Ruane considers what clues the long-term performance of BT shares might offer him about business performance and whether to…

Read more »