Deciding on the best shares to buy now is never easy. It’s even harder when the economic outlook is cloudy and we’re still fighting a pandemic. However, keeping these factors in mind can simplify the stock picking process.
I like to buy shares in companies that are here for the long haul. Companies that have a competitive edge and good customer service. The sort of company that you know can go the distance because they’ve proven time and again that they’ve the integrity and resources to keep at it.
Two of the best shares to buy now
A couple of FTSE 100 stocks spring to mind. The first is Unilever (LSE:ULVR), because its brand name appears on so many of the products I buy. The second is Diageo (LSE:DGE), the alcoholic drinks giant with an array of covetable brands under its banner. Both these stocks have proved fairly resilient in the face of the pandemic and they’re well established with a loyal customer base. Best of all, I think they’ll emerge from a post-Covid-19 world both stronger and ready to grow.
Growth potential ahead
Unilever has a price-to-earnings ratio (P/E) of 21 and has just raised its dividend to achieve a yield of 3.6%. Unilever is the umbrella company that houses many of the household brands we use on a daily basis, such as Comfort, Persil, and Hellmann’s.
Its recent FY20 results showed underlying sales rose nearly 2%, which was less than analysts had hoped for. Sales increased in the hygiene and laundry lines of business, but beauty and ice cream sales suffered in the face of lockdowns.
Unilever has also begun streamlining. Restructuring will be costly but the company has strong margins and a global presence to sustain it.
Diageo doesn’t just sell alcohol; it markets these spirits in such an enticing way that ignites a loyal following. It’s Diageo’s ad campaigns that impress me the most about this company. Through seductive imagery and clever storytelling, it has built brands like Johnnie Walker, Guinness, and Baileys into the iconic beverages they are today.
FTSE 100 favourite Diageo has a P/E of 49, earnings per share are 60p, and its dividend yield is 2.5%. The company sells its drinks all over the world with a particularly strengthening fan base in North America. Sales in North America were up 12% in half-year results to 31 December. This offset its falling sales in other regions. Its free cash flow increased 125% to £1.8bn, and the company raised its interim dividend by 2%. China and India are two key markets for Diageo, and as these areas are striving for affluence, I think there are growth opportunities for Diageo.
On the downside, Diageo is an expensive stock. I think both Diageo and Unilever should be able to grow once the pandemic finally gets under control. Of course, the longer it takes to get the pandemic under control, the worse the impact on their finances.
I believe making money from the stock market is possible by choosing quality companies with growth potential and dividends that can be reinvested. That’s why I think Unilever and Diageo are among the best shares for me to buy now for my Stocks and Shares ISA.
Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo 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.