3 top FTSE 100 shares I’d buy in July
The Motley Fool
Published Jul 11, 2020 12:15
Updated Jul 11, 2020 12:40
3 top FTSE 100 shares I’d buy in July
Should you be buying shares when the economic outlook is so uncertain? Absolutely! I’ve found a number of FTSE 100 shares that I think will deliver strong returns to long-term investors from current levels.
Healthcare heavyweight If you’re building a diversified, long-term portfolio, I think you need to have some exposure to the healthcare sector. It’s an essential global business for which I believe demand will only grow.
My top FTSE 100 pick in this sector is pharmaceutical giant GlaxoSmithKline (LSE: GSK). Alongside its prescription medicine and vaccine businesses, the group also has a large consumer healthcare business — home to brands such as Sensodyne and Nicorette.
Glaxo plans to seperate its consumer business into a new company over the next couple of years. This will dividen the group into two smaller and more focused businesses. I think this will improve their growth potential — good news for shareholders.
The GSK share price has now fallen by nearly 15% from the highs seen earlier this year. The shares now trade on about 13.5 times forecast earnings, with a 5% dividend yield. I think this FTSE 100 share is priced to buy.
A FTSE 100 share for tech investors Big tech stocks are rare in the UK. One exception is cyber security software group Avast (LSE: AVST). This Prague-based firm only floated on the London market in 2018, but its continued growth has already lifted it into the FTSE 100. I think there could be more to come.
Avast’s core anti-virus product has a free version, which the firm uses to recruit users to whom it can sell additional services. The group also has a corporate business. This might sound like a small operation but it’s not — Avast has over 435m active users and generated revenue of $873m in 2019.
Operating profit margins are high, at around 40%. Cash generation is good too, which means the group’s after-tax profits are reliably converted into spare cash. The only criticism I’d make is that the firm’s growth rate is relatively low — adjusted profits rose by just 8% last year.
Despite this, I think Avast’s strong financial performance and large customer base should support continued growth. The shares currently trade on about 20 times forecast earnings, with a dividend yield of around 2.1%. I think that’s a fair price to pay for this high quality FTSE 100 share.
A fashion stock you can trust When you invest in a company there’s always an element of risk. As outsiders we never know everything about a business. One company that tries hard to provide a level playing field is retailer Next (LSE: NXT), which is known for the quality of its financial reporting.
The bad news is that Next’s management expect sales to fall by between 30% and 40% this year. As a result, pre-tax profits are expected to fall from £728m last year to a maximum of £150m.
Get The App
However, there’s good news too. Careful management means that the group’s financial position remains very strong. Net debt is actually expected to fall this year.
Another attraction is that broker forecasts suggest profits will bounce back quickly next year. If they’re correct, then this FTSE 100 share now trades on just 13 times forecast earnings.
Next is a highly profitable business with an excellent track record of shareholder returns. I’d rate the shares as a buy at this level.
The post 3 top FTSE 100 shares I’d buy in July appeared first on The Motley Fool UK.
us better investors.
Motley Fool UK 2020
First published on The Motley Fool
Written By: The Motley Fool
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.