FTSE 100 stocks stopped falling on Tuesday after disappointing economic news prompted a global sell-off towards the end of last week.
This was prompted by the news that US inflation rose again in May, and that the British and German economies would grow slower than expected this year and the next. Markets were spooked by the possibility that the US Fed may increase interest rates by as much as 75 basis points this week.
But, for me, now looks like a good opportunity to buy. In fact, I’m not alone. Bill Street of Quintet Private Bank Europe told Bloomberg TV this morning that it was the “investor opportunity of the decade“. Some analysts have also suggested that the upcoming Fed rates hike will reassure the market on inflation.
So here are three stocks I’m buying right now.
Persimmon
Persimmon (LSE:PSN) is a dividend heavy-hitter. In fact, it goes ex-dividend on Thursday and offers an annual yield of 10.8%. That’s massive.
This might sound like a strange one ahead of expected interest rate rises. But, for me, interest rate rises are a sign that the Bank of England is taking inflation seriously. The sooner we are out of this period of hot inflation, the better.
One reason I like Persimmon is because it is less impacted by the cladding crisis than other companies. The housebuilder expects to spend £75m on recladding homes, less than 10% of the company’s pre-tax profits in the last reporting year. By comparison, Crest Nicholson might see its FY profits wiped out by its pledge.
Incidentally, earlier today, Crest upped profit expectations for the year, noting higher selling prices. This is good news for the sector.
However, higher rates could dampen demand for houses. This is something I’ll have to keep an eye on.
Hargreaves Lansdown
Hargreaves Lansdown (LSE:HL) shares have been on a downward track this year after the financial services company reported a slowdown in business. It’s down 52% over the past year.
Hargreaves is my investment platform of choice, as I think it offers the best services to its customers. And, for me, this marries well with an increase in number of private investors during the pandemic. One-in-10 Britons started investing since the start of the pandemic, according to Lloyds.
The lockdown trading boom may be over, but thousands of new investors have been introduced to trading. In May, the company announced a 46% fall in revenue. This is certainly not a good trend, but the pandemic was an exceptionally good period for the business.
In the short term, the cost of living crisis may slow private investing but, in the long run, I’m positive on Hargreaves Lansdown.
Rolls-Royce
Rolls-Royce was upgraded by Morgan Stanley to “overweight” on Monday. The bank said that the earnings recovery is much closer than the market has priced in.
The engineering giant is trading near its pandemic low, but the aviation sector is recovering. Civil aviation is Rolls-Royce’s biggest segment and this took a massive hit during the pandemic.
One issue is Rolls-Royce’s considerable debt. It’s shedding business units to reduce debt and, in turn, this will reduce future profitability.
