When looking for the best shares to buy, my starting point is FTSE 100 stocks. I’d aim to build a balanced portfolio of between 10 and 20 blue-chips, over time. I reckon these three are worth a look.
House prices are booming and so is the housebuilding sector. I think one of the best shares to buy in this sector is also the biggest, Barratt Developments (LSE: BDEV). Earlier this month it increased full-year expectations, as it completed more homes and sold them for higher prices. Today’s high demand looks set to continue, even after the stamp duty holiday expires.
My worry is that rising building costs will eat into profits as commodity prices spiral, while supply chain issues could slow completions. Unemployment could rise once furlough ends, making buyers feel poorer.
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However, with the new-build market underpinned by the government-backed Help to Buy scheme, Barratt’s valuation of just 10.7 times forecast earnings and forward yield of 3.7% (covered 2.4 times) look tempting to me.
This also looks like one of the best shares to buy
Prudential (LSE: PRU) also merits a place on my list of best FTSE 100 shares to buy, in part due to its low valuation of just 12.6 times forward earnings. The insurer is now focusing on fast-growing Asian and African markets, offering a vast untapped market of the middle-classes look to build and protect their wealth. The opportunity is huge.
Share price growth has been strong lately with the stock up 43% in a year. There’s a danger it may idle after posting such quick-fire growth, despite that low valuation. Another potential concern is that Prudential’s negligible dividend leaves investors relying on growth. A planned $3bn equity raise aimed at reducing debt and funding opportunities could dilute the stock.
Despite this, sales are accelerating both in Asia and Africa as they emerge from the pandemic, so there’s a vast opportunity for investors willing to be patient.
FTSE 100 growth stock
I also rate quality assurance provider Intertek Group (LSE: ITRK) as one of the best shares to buy on today’s FTSE 100. Yesterday, it reported “solid” revenue growth of 2.7% year-to-date, speeding up in March and April when revenues jumped 9.3%. Sales are still below 2019 levels, but the group remains on track to hit this year’s targets.
My concern is that the stock is expensive, trading at 30.9 times earnings. Recent growth has been good, but not that good. Especially since the yield is just 1.8%.
However, I think it’s a strong long-term opportunity as Intertek seeks new outsourcing opportunities in the $250bn global quality assurance market. It should also benefit from the global push to net zero carbon as companies battle to prove supply chains are clean.
I don’t expect instant success, but I never do when hunting down the best shares to buy. Instead, I prefer to focus on the long-term story and that remains promising. With all three stocks, I might wait to buy them on the dips.
