I’m always on the lookout for blue-chip stocks that appear undervalued. Here are two FTSE 100 stocks I’d buy for my portfolio if I had £2k to invest today.
FTSE 100 stock investments
The first company is accounting software provider Sage (LSE: SGE). As a business owner, I know how stressful changing accounting software can be. Finding a product that works well is hard enough. Moving from one provider to another is a different challenge altogether.
I think this is a solid competitive advantage for the firm. Users like me won’t leave a company overnight. A competitor has to provide something much better to justify the time and effort required.
To put it another way, I reckon the company can generate recurring, growing revenues year after year, which is the main reason I’d buy the FTSE 100 business for my portfolio today.
At the time of writing, shares in Sage also offer a dividend yield of 2.7%. This distribution is backed by the recurring revenue stream from subscriptions.
Of course, like all businesses, Sage does face risks and challenges. It might be difficult for customers to shift away from the platform, but it’s not impossible. If competitors offer better products with significant discounts, customers could start leaving in droves. What’s more, as a tech business, Sage is exposed to cybersecurity risks. A large hack could devastate the firm’s reputation with customers.
Over the past six months, countries worldwide have lined up substantial economic stimulus plans to help recover from the pandemic. Infrastructure spending is going to be a cornerstone of these ambitious plans. I think that suggests demand for essential commodities such as iron ore and copper will surge over the next year.
Glencore (LSE: GLEN) may be one of the biggest beneficiaries of this. The FTSE 100 firm is one of the world’s largest commodity traders. As well as producing commodities, the company also buys and sells them on behalf of clients.
This can be a very lucrative business, but it also requires a considerable amount of capital. As such, large, well-established companies like Glencore dominate the industry.
When combined with the group’s mining operations, Glencore’s trading business means the organisation is a commodity powerhouse that’s well-placed to generate profit in all market environments.
However, this stock isn’t without its risks. Several years ago, the company ran into trouble because it borrowed too much. This is always going to be a risk with commodity trading. Management had to take evasive action to raise more cash, although this didn’t prevent the stock price from tumbling.
Despite this risk, and the fact that Glencore is exposed to highly volatile commodity prices, I’d buy the FTSE 100 stock for my portfolio today. I think it’s one of the best ways to invest in the global economic recovery.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Sage 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.