Two fantastic FTSE 100 companies I’m buying in May!

‘Buy what you know’, as Peter Lynch said. And that’s exactly what this Fool will be doing next month with these FTSE 100 stocks.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

British union jack flag and Parliament house at city of Westminster in the background

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The FTSE 100 is packed full of bargain stocks. And today I’m looking at two companies on the index that I see great potential in.

Why am I buying Hargreaves Lansdown?

Firstly, what does Hargreaves Lansdown (LSE:HL) do? Well, it is a digital wealth management service administering company, which provides a range of services including stocks and shares individual savings accounts (ISAs), Self-Invested Personal Pensions (SIPPs), share dealing, fund dealing, drawdown, cash savings, lifetime ISAs and junior ISAs.

While the broader market lost around 0.8% in 12 months, Hargreaves Lansdown shareholders did worse, being down 18%. Having said that, it’s inevitable that stocks will be over sold during a bearish market, so I will need to keep my eyes on the fundamental developments in the coming future.

The stock is down by 65% from its pandemic peak and is trading at 10-year lows. European stocks have rallied in recent weeks as banking worries faded, but financial stocks are still trading at discounts. Research suggests that I may be able to use this situation to our advantage. Put simply, investors tend to overreact to bad news.

Hargreaves makes its money through platform fees, transaction fees and interest on customer deposits. Going forward, I think this business may be forced to cut its prices somewhat to become more competitive. But it looks affordable to me, given Hargreaves Lansdown’s near-50% margins.

In my view, this business should continue to benefit from macro-economic trends towards self-managed investment and remains in a strong position to deliver attractive long-term returns.

Total revenue for this year is estimated at £698m, up from £583m in 2022. Net profit is estimated at £300m, up from 2022 net profit of £216m.

The shares also currently offer an attractive 5%+ dividend yield. Historic yields are strong too, with 2022 coming in at 5%. Analysts are forecasting a 2023 yield at 5.05% and 2024 at 5.17%.

Hargreaves Lansdown has a strong team, good customer service, bargain prices, promising financials and supplies a product I can’t live without!

Why Barclays?

The Silicon Valley Bank failure appears to have resulted from the bank’s decision not to hedge its interest rate risk. Are other banks at risk?

Well, not Barclays (LSE:BARC). I don’t think the management is that ignorant. Quite frankly, it’s ‘banking 101’ to hedge interest rates!

Last year’s results showed a substantial increase in interest income, improved lending margins, and strong capital positions. Increases in expected bad debt look relatively modest and manageable. Shareholders are being rewarded with increased dividends and substantial share buybacks.

Moreover, profitability has improved. In other words, it is generating stronger returns on its assets.

Barclays is undoubtedly cheap, trading at five times earnings, and could be a fantastic value play for me. The company’s investment banking division could theoretically also support stronger growth.

The main concern I have is that the UK market is structurally mature and low growth. However, I think that retail banks like Barclays look in good shape, trade at attractive valuations, and offer high dividend yields.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Benjamin Brinsden has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays Plc and Hargreaves Lansdown Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Recently released: October’s small-cap stock recommendation [PREMIUM PICKS]

We believe the UK small-cap market offers a myriad of opportunities across a wide range of different businesses and industries.

Read more »

Investing Articles

Here’s how a Stocks and Shares ISA and Lifetime ISA could supercharge my wealth!

Individual Savings Accounts (ISAs) can help UK share investors take their earnings to the next level. And their importance is…

Read more »

A person holding onto a fan of twenty pound notes
Investing Articles

A high-yield dividend ETF and an investment trust to consider this November!

Investors wanting to boost their passive income could benefit from investigating these high-yield funds and trusts, says Royston Wild.

Read more »

Investing Articles

2 of my favourite, cheap FTSE 100 growth shares this November!

These FTSE 100 growth shares could be great long-term picks to consider, reckons Royston Wild. At current prices he thinks…

Read more »

Investing Articles

Up 26%, can the BT share price really push higher still?

The BT share price has surged on several catalysts in 2024, but there’s evidence to suggest that the stock could…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

What are the best dividend shares to buy right now?

As shares in B&M European Value Retail have fallen, the dividend yield has reached a 10-year high. Should investors be…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

My favourite FTSE 100 passive income stock that keeps the Christmas coffers full

The holiday season is expensive and can leave many consumers struggling to make ends meet. Here’s how I use a…

Read more »

Investing Articles

The latest growth forecasts suggest the Glencore share price will hit 555p!

Harvey Jones has been disappointed by the performance of the Glencore share price since he bought the commodity stock last…

Read more »