The FTSE 100 has had a great run recently. Today, the index has risen above 7,000 points. That’s about 40% higher than the level it was trading at in March last year during the stock market crash.
I think the FTSE 100 has the potential to keep rising. Right now, we’re in the midst of a powerful bull market. With that in mind, here’s a look at three Footsie stocks I’d buy today to capitalise on this bull market.
A FTSE 100 retail legend
One area of the market that I expect to do well over the next 12 months is the consumer discretionary sector. After months of lockdowns, many consumers are cashed up and keen to spend money.
A FTSE 100 stock that I believe could benefit from this backdrop is JD Sports Fashion (LSE: JD). It’s a leading retailer of athletic footwear and athleisure clothing that operates globally. I can see a lot of money (such as US stimulus cheques) being spent on new trainers in the months ahead as the world reopens. Earlier this week, JD advised that it expects its profit before tax to rise substantially this year.
JD faces plenty of competition from the likes of Amazon. So, the investment case is not without risk. However, the company just resumed paying a dividend, which suggests that management is confident about the future.
A packaging king
Another area of the market that I believe could outperform in 2021 is the industrial sector. In the first quarter of the year, this was the sector that saw the most buying from corporate insiders globally. Insider buying tends to be a good predictor of future performance because insiders see business trends way ahead of other investors.
One FTSE 100 stock I like here is Smurfit Kappa (LSE: SKG). It’s a leading packaging company that specialises in products that are renewable, recyclable, and biodegradable.
Smurfit delivered a very resilient performance in 2020. For the year, revenue was only down 6%. Meanwhile, profit before tax rose 10%. As a result of this performance, it increased its final dividend by 8%. There aren’t many FTSE 100 companies that have delivered that kind of dividend growth recently. The group advised that 2021 had “started well” with strong demand for its products.
Packaging companies are quite cyclical. This is a risk to be aware of – if the economy contracts again, SKG could suffer. Right now, however, I think the company is well placed for growth.
A dominant FTSE 100 investment company
Finally, I also think investment management companies should do well in this environment. Not only should they benefit from higher stock markets but they should also benefit from increased interest in investing. It’s worth noting that US broker Charles Schwab added 3.2m new brokerage accounts in Q1 – more than all of 2020.
One FTSE 100 company I like in this space is Hargreaves Lansdown (LSE: HL). It operates the largest retail investment platform in the UK and has a dominant market share in the retail investment funds area. Recently, it advised that its profit for the first half of 2021 should be above analysts’ expectations due to high volumes of stock trading. It also recently raised its dividend significantly.
One risk I’m monitoring here is the threat of rivals such as Trading 212. These companies could steal market share. The stock’s valuation is also quite high. But I like the long-term risk/reward proposition.
Edward Sheldon owns shares in Hargreaves Lansdown, Amazon, and JD Sports Fashion. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Hargreaves Lansdown and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. 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.