I’m searching for the best FTSE 100 stocks to buy in 2023. Here are two on my radar right now.
Retail giant
Owning UK-focused retail shares can be dangerous in the current climate. According to the Confederation of British Industry (CBI), consumer spending is slumping as the cost-of-living crisis bites.
A net 19% of companies have reported falling annual sales this month, according to the CBI. That’s a big swing from the previous month. On top of this pressure, retailers are also enduring a mix of rising product, energy and labour costs.
But despite this gloomy outlook I’m considering buying shares in FTSE 100 business Associated British Foods (LSE: ABF). As people’s budgets stay under pressure I expect sales at its low-budget Primark fashion chain to remain rock solid. I think it will benefit from people trading down to cheaper products.
Reasons for optimism
I’m also encouraged by the retailer’s tentative move into e-commerce, even if it’s not a full online service. The launch of Primark’s ‘click and collect’ service in England and Wales this month encouraged website-crashing levels of traffic.
I’m also drawn to the retail division’s commitment to keep expanding. Last week it announced plans to open four new UK stores over the next two years.
Finally, I think the defensive nature of ABF’s other operations could help it weather what could be a tough 2023. Food sales remains broadly stable at all points of the economic cycle. So demand for the company’s edible products and ingredients are likely to hold up well.
8%+ dividend yields!
I don’t have a bottomless well of cash for investment. But when I have cash to spare, ABF will be near the top of my shopping list.
I might also consider building my stake in Taylor Wimpey (LSE: TW). The housebuilder’s share price has sunk this year amid fears of a housing market meltdown.
This means the FTSE 100 stock now trades on a forward price-to-earnings (P/E) ratio of 5.2 times. It also carries dividend yields north of 8% for the next two years. These sit at 8.7% and 8.3% for 2022 and 2023, respectively.
Fence-sitting… for now
I find this sort of value hard to ignore. And what’s more, I continue to believe that the long-term outlook for shares like Taylor Wimpey is a robust one.
Demand for new-build homes will keep growing as Britain’s population steadily expands. At the same time government is still to introduce an effective housing policy to address this need. The upshot is that property prices should continue growing strongly over the next decade.
Having said that, I think I’ll hold off on buying Taylor Wimpey just a little longer. Property listings firm Zoopla predicted today that UK house prices will fall 5% in 2023. This, when combined with rising construction costs, could smack profits among housebuilding shares and damage dividend levels.
There are other FTSE 100 income shares I’d prefer to buy right now. But I’ll be keeping close tabs on Taylor Wimpey and the broader housing market for reasons to buy.
