After the rollercoaster ride of the last few months, the FTSE 100 is now trading where it was at the beginning of 2022. Today, I’m highlighting three stocks from the index I’ll be keeping an eye on in April.
Tesco
Supermarket titan Tesco (LSE: TSCO) reveals its latest set of full-year numbers on 13 April. The shares are down 6% so far this year. That’s hardly great. However, it’s clearly far better than the performance of other members of the FTSE 100.
Regardless of what happens next month, I continue to rate Tesco highly as a core holding if I were looking to build a defensive portfolio with an income bent. The shares have a forecast yield of 3.9% — slightly higher than that of the FTSE 100 as a whole.
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Naturally, the supermarket space isn’t going to become any less competitive. The rise in the cost of living could push more shoppers in the direction of German discounters Aldi and Lidl. Global food supply disruption due to the Russia/Ukraine conflict is another potential headwind.
However, with 20 million households signed up to its Clubcard loyalty scheme helping to keep the checkouts ringing and a huge market share, this is easily the least risky listed firm in the space, in my opinion. I think existing holders can sleep easily.
Rio Tinto
Mining giant Rio Tinto (LSE: RIO) was one of my five stocks to buy for 2022. Since the beginning of the year, its share price has climbed 18%. Pleasing as that is, I wonder if there might be more gains ahead. The company is down to release an operations review for the first quarter on 19 April.
Even if Rio’s news doesn’t lift the share price further, I still reckon this is a great stock to buy for two reasons. First, it’s a dividend machine. Right now, the stock has a forecast yield of 10%! Second, the switch to renewable energy sources, while gradual, is unstoppable. That means huge demand for the sort of metals that the top-tier company digs up.
As things stand, Rio’s shares trade at seven times earnings, which is average for its sector but cheap relative to the rest of the market. Then again, investors need to remember just how volatile commodity prices can be. So while I think that Rio remains a good stock to hold, I’d always make sure I was fully diversified across other sectors before pulling the trigger.
Smith & Nephew
It might not grab the headlines compared to other FTSE 100 stocks but I continue to be interested in acquiring a slice of medical devices firm Smith & Nephew (LSE: SN).
As a result of the Covid-19 pandemic, a lot of elective surgery was postponed. This inevitably impacted trading at the company, sending the share price firmly lower. Now that Covid-19 is no longer grabbing the headlines and restrictions have been lifted, I think a recovery could be on the cards.
The elephant in the room for me right now is the valuation. A P/E of 19 isn’t cheap, although this should fall as business bounces back. However, there’s nothing to say the stock won’t fall lower between now and then on general market concerns or any potential coronavirus comeback.
I’ll be reading the Q1 trading update — due to land on 28 April — with great interest.
