Have £5k to invest? Here are 5 shares I’d buy for a FTSE 100 starter portfolio

The market has so far reacted calmly to lockdown news. Roland Head says he’s continuing to look for FTSE 100 shares to buy for his portfolio.

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.

The FTSE 100 has fallen by 25% so far this year. I think this dramatic decline has probably created some long-term buying opportunities. My focus now is on hunting down bargain shares to buy for long-term income and growth.

Today, I’ve picked five FTSE 100 shares I’d buy for a starter portfolio. I believe they’re all likely to outperform the market over the coming years.

A lockdown winner

One company that has continued to trade well this year is consumer goods group Unilever, whose UK brands include Domestos, Hellmann’s and Persil.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

A slump in ice cream sales means profits for the year are expected to dip. But at-home demand is strong, and Unilever’s high profit margins and strong cash flow look safe to me.

The shares have pulled back from recent highs, but Unilever’s share price is still up by 55% over the last five years. This is a share I’d buy today for a long-term portfolio.

Packaged for long-term growth

My next pick is packaging group DS Smith. So far this year, the company has seen weaker demand for industrial products offset by strong demand for e-commerce and grocery packaging.

I’ve owned this share for a while and believe that having bedded down recent acquisition, the company is now moving into a more profitable phase.

DS Smith shares look decent value to me, on just 12 times forecast earnings. Dividends are expected to resume and could yield 4.6% next year. This is a share I’d like to buy more of.

My top healthcare pick

I’ve avoided hot pharma stocks and vaccine hopefuls this year. I don’t have the expert knowledge to know which of these small companies have the best chance of success.

However, one healthcare stock where I’ve doubled down my personal holding is FTSE 100 group GlaxoSmithKline. I explained recently why I think this stock could be worth a lot more in the future.

Right now, GSK shares are trading on 11 times 2021 forecast earnings, with a dividend yield of 6.2%. For a business that generated an operating margin of 21% last year, I think that’s too cheap.

A share I’d buy for the next decade

Industrial group Johnson Matthey currently makes most of its money producing catalytic converters for cars and trucks. This business could come under threat if the world shifts more and more towards electric vehicles, but the company’s 203-year history suggests to me that it will adapt.

Areas where JMAT is targeting growth include pharmaceutical ingredients and battery technology. The stock is down by nearly 30% this year and trade on just 12 times forecast earnings. I’d be happy to buy JMAT shares for my portfolio at this level.

Profit from global growth

Nothing stays the same forever. I believe the world will eventually recover from Covid-19. When it does, I think advertising group WPP should be a great way to profit from the recovery.

As one of the world’s largest ad businesses, WPP is exposed to most parts of the global consumer economy. I was reassured to see last week that revenue has only fallen by 10% so far this year. In my view, that’s a solid result in the circumstances.

Broker forecasts suggest that WPP shares could offer a dividend yield of 6.5% next year. I already own the shares, but I’d buy more at this level.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

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.

Roland Head owns shares of DS Smith, GlaxoSmithKline, and WPP. The Motley Fool UK has recommended DS Smith, GlaxoSmithKline, and Unilever. 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

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

Building a second income stream in 2025 is now more important than ever

With the backdrop of today's economic landscape, Mark Hartley investigates the importance of a second income and how to build…

Read more »

Google office headquarters
Investing Articles

Down 29% and 26%, these ‘Magnificent 7’ growth stocks are still on sale!

Both of these mega-cap growth stocks are more than 25% off their highs right now. And Edward Sheldon believes they…

Read more »

Investing Articles

My favourite UK stock is up 365% in 5 years and analysts still say it’s a strong buy!

Harvey Jones loves this top UK stock but was wondering whether it would finally run out of steam. Its response…

Read more »

Investing Articles

Is the stock market going to crash when the tariff window expires?

The stock market’s rallied on news of a 90-day pause to some US tariffs. But could it be set to…

Read more »

Investing Articles

2 investment trusts to help investors become Stocks & Shares ISA millionaires

One of the biggest challenges for new Stocks and Shares ISA investors is which investments to make. Dr James Fox…

Read more »

Investing Articles

The Greggs share price has plummeted for good reason! It’s now a proper dividend stock

Dr James Fox explores whether the beaten-down Greggs share price represents a potential buying opportunity or a value trap.

Read more »

Working from home due to social distancing
Investing Articles

A year ago, £10,000 in Tesco shares — at today’s price — is now worth…

Tesco's provided solid investor returns since April 2024 thanks to strong share price gains and healthy dividends. Can it keep…

Read more »

Investing Articles

Just released: our 3 top small-cap stocks to consider buying in April [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »