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I’d buy these 2 FTSE 100 stocks before UK shares rally again

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I think 2021 could be a good year for FTSE 100 stocks, and about time too. The index of top UK shares and 2020 down by around 14.3%, whereas many global indices actually grew during the pandemic. In the US, for example, the S&P 500 ended the year 18.4% higher.

That doesn’t deter me from buying FTSE 100 stocks. Quite the opposite, in fact. UK shares have underperformed since the Brexit referendum more than four-and-half-years ago, but may now start to play catch-up. Brexit is largely settled and our vaccine programme is rolling out. The UK could suddenly find itself ahead of the game. Now wouldn’t that be a novel experience?

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If I’m right, I think these two FTSE 100 stocks could do well in 2021 and beyond, and would consider adding them to my portfolio.

The UK should bounce back

BT Group (LSE: BT.A) has been staging a revival, its share price up more than a third in the past six months. Management is working hard on its modernisation programme, and recently delivered £352m in cost savings in just six months. This helped offset the Covid-19 impact, which hit BT Sport revenues and business activity in its enterprise units. Other FTSE 100 stocks have been hit a lot harder.

While BT’s profits fell around 20% during the early stages of the pandemic, at least it still posted profit – of just over £1bn in the first half of the year. It axed its dividend but plans to reinstate it next year. Openreach continues to roll out nicely.

BT’s earnings have declined for four years in a row, but that should reverse once current investments pay off and the country is liberated from lockdown. Many problems are priced in, with the company trading at just 6.9 times forward earnings. I would check out the BT share price before the dividend is reinstated, rather than afterwards.

These two FTSE 100 stocks could fly

I’d also take a close look at quality assurance provider Intertek Group (LSE: ITRK). I was just Googling away and spotted a headline from The Daily Telegraph saying “Intertek is a great business but the valuation is rich”. The article was written in March 2009 but the same headline could serve today. It trades at a premium valuation of 27.1 times earnings.

Inevitably, Intertek has been hit by the pandemic, with earnings down almost 10% to £941m in the four months to 31 October. Impressively though, management expects to cut debt this year, to between £570m and £590m.

The business has shown its resilience, while its product testing and certification and services are likely to be in demand once the global economy starts moving again. A return on capital employed a 47.9% is also a promising sign.

The shares were growing strongly before the crisis and could do so again. That toppy valuation could fall when earnings pick up.

Both FTSE 100 stocks appeal to me. I’d buy them before the next stock market rally.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Intertek. 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.

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