FTSE 100 shares are a bit weak again, as the City frets about the latest batch of tech stock earnings. But I see lots of great buys for the long term right now.
Here are three I have on my list of options for my next ISA buy.
Food and clothes
Associated British Foods (LSE: ABF) posted good results for the first half on Tuesday, I thought. But the market doesn’t seem to agree, and the shares dipped 3% in morning trading.
In the first half, we saw a 17% increase in group revenue. And the star unit, Primark, brought in a 19% rise, with growth in all countries.
But the pinch does show in profits. Operating profit dipped by 3%, with adjusted earnings per share down by the same 3%. So maybe that squeeze on margins has put the buyers off.
But I can see margins improving again when price rises slow, and when some falling wholesale prices start to feed through to shelf prices.
Maybe the valuation is keeping the share price back, with a forecast price-to-earnings (P/E) ratio of 16.5. The dividend is modest too, with a 2.1% yield. But it was lifted by 3% on H1 results.
Gas and electric
National Grid (LSE: NG.) shares have had a good five years, with a 35% gain. But the forecast dividend yield is still up at 4.5%.
There are fears for the future of gas, which will keep some folks away. As we move to new fuel sources, the network will need to shift to electric, and gas could become obsolete.
But I think that risk is over-egged. Things are moving, now, and we already see close to 70% of the business focused on electricity. National Grid is ahead of the trend, never mind just keeping up.
This is a regulated business, though, and I don’t like that much. It means price caps can hold back profits, and regulators get to say how much a firm must reinvest, and things like that. So that’s a risk too.
But in the long run, I see a cash cow here.
Bank outlook
I think 2023 could be the year bank shares get back in their stride. Lloyds Banking Group and Barclays seem to get the most eyes on them, but NatWest Group (LSE: NWG) looks good to me as well.
The share price has fallen back a bit in 2023. But the forecast dividend yield is now up over 5% for the next few years. Well, actually, some analysts put it higher than that, up around 6% and growing.
In fact, bank dividends all look like they could be strong this year. They make up a growing portion of the cash that the City expects the FTSE 100 to hand out. Analysts rate profit growth in the sector among the fastest too.
There are clear risks in 2023, with slowing lending one of the big ones. And loan impairments could hurt too. So I think we need to keep a close eye on those. That means the Q1 update due on 28 April will be a must-read for me.
