So far, 2021 has been a pretty good year for UK and US investors. As I write, the UK FTSE 100 index hovers around 6,927.42 points, up 7.2% since the end of 2020. That’s a decent start for the index, but it languishes nearly 1,000 points — almost an eighth (12.3%) — below the record high set in May 2018. Likewise, the US S&P 500 index has gained 9.1% this calendar year and hit an all-time high just yesterday. Also, the tech-heavy US Nasdaq Composite index has gained 7.3% since the start of the year. But when I look at the best stocks to buy now, I see bargains in large-cap UK value shares. Here’s one British success story that I’d be happy to own shares in today.
Best stocks to buy now: a 204-year-old star
When I look at the best stocks to buy now, I’m very much drawn to buying British. Not through any sense of patriotism, but simply because I’m an old-school value investor. And right now, I see plenty of value hiding in the blue-chip FTSE 100. Within the Footsie lurk several world-class companies with solid revenues, earnings, cash flow, and dividends. Take, for example, Johnson Matthey (LSE: JMAT). You might never have heard of this company. Yet this great British business has been trading since 1817, just two years after the Napoleonic Wars ended in Europe. Wow.
Why do I think JMAT is one of the best stocks I could buy now? Simply because it’s a great business to own for prospective future growth. The group has strong market shares in the production of specialist chemicals and precious metals. Its many and varied products are used in the production of industrial chemicals, emissions controls, batteries, medical products, and pharmaceuticals. As I write, the Johnson Matthey stands at 3,142p, valuing the group at a nice, round £6bn. When I wrote favourably about JMAT on 13 April 2020, the share price was limping along at 1,972p. Since then, this stock has surged by 1,170p. That’s a gain of almost three-fifths (59.3%) in less than 11 months. Nice.
I regard JMAT as a Warren Buffett stock
Billionaire investment guru Warren Buffett advises investors: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Right now, I’m excited about JMAT’s significant exposure to the global switch to electric vehicles (and hydrogen fuel cells). Furthermore, the company released a better-than-expected full-year trading update yesterday, demonstrating its market resilience and financial strength. This sent the JMAT share price leaping to a 52-week high of 3,340p, before falling back. Maybe other investors saw this as one of the best stocks to buy now, hence the strong bounce?
Of course, I could be completely wrong. Matthey could be one of many losers in the transition from fossil fuels to renewables. Its earnings could decline still further, as they did during Covid-19-ravaged 2020. What’s more, the company trimmed its dividend last year (but expects payments to resume rising over time). For now, the dividend yield is 1.6% a year. Then again, demand from China’s car market is already strengthening, plus any sustained global recovery should boost JMAT’s earnings. That’s why this great British champion is on my watchlist of the best stocks to buy now!
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Cliffdarcy has 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.