3 FTSE 100 shares to buy in August

Strong trading and upbeat expectations are among the reasons I’d buy these FTSE 100 shares for August and beyond for my diversified portfolio.

| 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.

In June, international distribution and services company Bunzl (LSE: BNZL) delivered an upbeat trading statement.

In the first half of 2021, revenue increased by between 6% and 7% at constant currency rates. And the progress arose because of contributions from recent acquisitions and a “strong” recovery from the pandemic.

Why I think this is a FTSE 100 stock to buy

The directors reckon the steady performance is due to the “resilience” of the business model. And I’m impressed by the firm’s multi-year financial record. It shows consistent upticks in revenue, earnings, cash flow, and shareholder dividends.

And steady growth looks set to continue. For example, the company completed two bolt-on acquisitions in the period, one in the UK and one in Australia. Chief executive Frank van Zanten said, “Growth through acquisitions is an important part of the ongoing strategy.”

With the share price near 2,642p, the earnings multiple for 2022 is just above 18. That’s a full valuation given that earnings growth will likely be measured in a low, single-digit percentage that year. And it adds risk for shareholders. But I think Bunzl has earned its rating. For me, this is a FTSE 100 share to buy on dips and down-days to hold for the long term.

Meanwhile, the recent half-year results report from BAE Systems (LSE: BA) revealed a performance that chief executive Charles Woodburn described as “strong”.  He said it underlined his confidence in full-year guidance for “top-line growth, margin expansion and three-year cash targets.”

Overall, Woodburn reckons the technology-led defence, aerospace, and security solutions business is well-positioned for sustained growth ahead. Part of the plan for achieving that is the current ramping up of investment into advanced technologies.

Robust cash generation

In a sign that cash generation is robust, the company accelerated its UK deficit pension payments in 2020. And the directors just increased the interim dividend by 5% and announced a new share buyback programme worth up to £500m. Meanwhile, City analysts expect earnings to increase by just over 20% this year and by almost 9% in 2022. And with the share price near 576p, the earnings multiple is just above 11 when set against those figures.

There are some risks because much of the business depends on defence spending and government policies can change. However, I’d embrace the uncertainties and hold some of the shares for at least five years.

And last week’s half-year results report from housebuilder Taylor Wimpey (LSE: TW) trumpeted a “record” performance and “excellent momentum into the medium term.” Chief executive Pete Redfern said the company delivered a “strong” operating margin of just over 19%. He reckons that achievement arose because of tight cost discipline and higher completions in the period.

A market with a tailwind

Looking ahead, the directors expect full-year operating profit for 2021 of around £820m, a figure that beats analysts’ previous consensus. And UK completions will likely come in at the top end of the firm’s previous guidance of 13,200 to 14,000.

Taylor Wimpey is trading well in a market with a tailwind. However, the housebuilding industry is notoriously cyclical and any future downturn could hurt shareholders here. But the valuation remains modest. With the share price near 172p, the earnings multiple set against 2022’s expected earnings is around nine. And there’s a chunky dividend to collect along the way. I’m tempted by the FTSE 100 stock.

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.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Bunzl. 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

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

How I’d invest my first £20k ISA to target £4,900 a year from dividend shares

Looking for dividend shares in a new Stocks and Shares ISA, and want diversification too? Here's how I'd go about…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »