The FTSE 100 has risen by around 15% over the last year. But it’s still well below the record highs seen shortly before Covid-19 broke cover.
I reckon some of the shares in the index look like bargains for a long-term investor like me. Today, I’m going to look at three stocks on my list to buy.
Down 29%
Shares in FTSE 100 consumer goods firm Reckitt (LSE: RKT) soared last year as sales of Dettol and other cleaning products rocketed.
But Reckitt’s share price has fallen by 29% over the last 12 months, as the company has warned of rising costs and slowing sales. This news has knocked the shares. But I think it’s an issue that’s affecting all large consumer groups — Unilever recently reported the same issues.
Reckitt stock is now trading at levels close to those seen during last year’s crash. I think this is probably too cheap.
Although this business faces some challenges, I expect brands such as Strepsils, Durex, and Nurofen to remain reliable sellers in the future.
Reckitt shares are now trading on a forecast price/earnings ratio of 18, with a 3% dividend yield. I’d be happy to buy the shares at this level.
A FTSE 100 stock with a 4% yield
The next stock on my list is Lloyds Banking Group (LSE: LLOY). This business — which includes Halifax, MBNA, Scottish Widow and Lex Autolease — is the UK’s largest mortgage lender.
The latest numbers from the bank suggest it’s continuing to recover well from the impact of the pandemic. The bank’s net income rose by 2% to £7.6bn during the first half of 2021, compared the same period last year.
The main risk I can see is that the recession we feared last year may still be on the horizon. This could put Lloyds’ profits under pressure once more and trigger a rise in bad debts. However, I can’t see any sign of this at the moment.
Lloyds shares offer a forecast dividend yield of 4% for this year. My analysis suggests that if the economy remains stable, this payout could grow steadily over the next few years.
A neat package
My final share is one I already own. FTSE 100 packaging group DS Smith (LSE: SMDS) produces paper-based products and manages its own recycling operations.
DS Smith was the subject of bid rumours earlier this year. While that approach didn’t work out, I do think there’s a chance the company could be snapped up by a larger rival at some point.
However, takeovers are unpredictable things. I’d never buy a stock based on bid hopes alone. Fortunately, DS Smith’s business appears to be performing well and improving. Profits during the second half of last year were well ahead of the equivalent period a year earlier. Brokers expect further gains over the next two years.
The rising price of raw materials is hitting this business too. But DS Smith expects to be able to increase its pricing to recover these costs. I believe demand for recyclable packaging is likely to continue rising for the foreseeable future.
To me, DS Smith shares look reasonably priced at current levels. I’d be happy to buy more today.
