FTSE 100: 2 cheap shares I’d add to my Stocks and Shares ISA today

BAE Systems (LSE:BA) and InterContinental Hotels Group (LSE:IHG) are two UK shares I think could help grow my Stocks and Shares ISA.

| 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.

The UK stock market has been a difficult arena in the last year. While US markets have thrived despite the impact of the Covid-19 pandemic, the FTSE 100 hasn’t fared so well. The UK’s primary stock index is down 10% compared to this time last year.

I still see value in buying UK companies in a Stocks and Shares ISA though. A Stocks and Shares ISA allows me to invest my money in the stock market, rather than having it sit as cash in my bank account.

UK citizens have an allowance of £20,000 for the tax year in which they can receive tax breaks. While there is more risk involved than in a Cash ISA, Stocks and Shares ISAs can be a good way to get started in the stock market.

But what UK shares would I add to my ISA today? While the FTSE 100 is down in the last 12 months, I think these two companies could represent a buying opportunity.

BAE Systems

Defence contractor BAE Systems (LSE:BA) has come through the pandemic relatively unscathed in comparison to fellow FTSE 100 constituents in terms of sales, with no major sign of a reduction in demand for its products from the governments it sells to.

BAE has consistently been one of the top dividend yielders in the index, and that has remained so throughout the pandemic. The payout currently yields 4.71% against a share price of 490p and is an attractive prospect for income investors.

It must be noted, however, that the shares have slipped over the last year and generally don’t have a history of strong growth. In the last 12 months the company’s share price has declined 27%. 

There is risk involved in that if a handful of countries were to reduce their defence spending, BAE’s revenue would be adversely affected.

But the indications are that that is unlikely to happen. If some of the big defence spenders were to cut costs at all, I would have thought 2020 would have been the time to do it. Spending remained strong in the UK, US, and Saudi Arabia.

BAE’s strong position in the market and reliable dividend makes me confident that the share price can return to growth over the next few years.

InterContinental Hotels Group

Despite the huge reduction in number of people staying in hotels over the last year, InterContinental Hotels Group (LSE:IHG) has managed to see its share price grow over the last year.

The shares are worth 4% more than they were 12 months ago. The conception and rollout of the Covid-19 vaccine programme has helped travel and leisure stocks rally in recent months.

With the news that around one-third of the UK population is now vaccinated and a roadmap for opening up the economy announced, there are signs of a return to normality in the sector.

That said, it may take quite a bit longer for the vaccines to be rolled out to Europe and further afield, which would have a negative effect on IHG’s profits and share performance.

The group, which owns hotel chains Regent and Crowne Plaza, announced a 48% reduction in revenues in a trading update this week. The operating loss was $153m against a profit of $630m a year previously.

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.

conorcoyle has no position in any of the shares mentioned. The Motley Fool UK has recommended InterContinental Hotels 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.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

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 »