Stock markets around the world have rallied in the first few weeks of 2021. However, the FTSE 100 has lagged behind its global peers. As such, I believe some of the best stocks to buy right now could be hidden in this index.
Here are three companies, in particular, that stand out to me as being undervalued today.
The best stocks to buy right now
BT (LSE: BT.A) is one company investors love to hate. The telecommunications giant has produced relatively poor returns for investors for the past five years. It is easy to understand why. The group has been haemorrhaging customers, it has a lot of debt, and the organisation recently eliminated its dividend.
Nevertheless, despite these challenges, BT is trying to change for the better. It is investing more in customer service and infrastructure. I think these investments will help the company return to growth, although it still faces substantial competition from peers and has a mountain of debt to manage.
Despite these challenges, I think the FTSE 100 stock has potential. That’s why I would buy the company for my portfolio today.
NatWest (LSE: NWG) is another company that investors aren’t always keen on. The group, which was formerly known as RBS, is still majority-owned by the UK government after being bailed out in the financial crisis.
Following the pandemic, NatWest’s outlook is pretty mixed. The group is expecting to write off billions of pounds of defaulted loans. Low interest rates have also curbed its profit margins. These risks won’t go away any time soon.
Looking past these issues, however, NatWest’s long term outlook is improving. If the UK economic recovery starts to gain traction over the next 12 months, the group may see an improvement in demand for loans and mortgages. That would help its bottom line. Regulators have also given the green light for the firm to reintroduce dividends.
With the stock trading at a significant discount to book value at the time of writing, I think this could be one of the best shares to buy now to capitalise on the recovery. That’s why, despite the risks outlined above, I’d buy it now.
FTSE 100 recovery play
Another recovery play I would buy today is British Land (LSE: BLND). Shares in this organisation have fallen dramatically over the past 12 months. However, the decline has outpaced the fall in the value of the company’s property portfolio. I think this presents an opportunity.
As the UK economic recovery gets under way, British Land may see an increase in rent collections and property values. This could lead to a significant improvement in investor sentiment towards the business, propelling shares in the FTSE 100 real estate investment trust higher.
That being said, there’s no guarantee the UK economy will improve markedly over the next 12 months. Commercial property values could continue to decline, putting additional pressure on the company’s balance sheet. In the worst-case scenario, British Land may even have to ask shareholders for more money to keep creditors at bay.
These risks could hurt the company’s long-term potential. Still, I think it’s one of the best shares to buy now as a way to profit from a potential economic recovery.
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Rupert Hargreaves owns shares in British Land Co. The Motley Fool UK has recommended British Land Co. 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.