For beginners looking for stocks to buy, the market can be confusing. It’s often difficult to know which stocks are reliable and which are risky. Those who lose money on their first investments can be put off for life.
For this reason, it’s important to choose safe and reliable stocks when starting out. This way, early investors are less likely to call it quits in the wake of a sudden loss. Fortunately, many stable FTSE 100 stocks provide a safe entry point for investors looking to test the waters.
Two of my top picks for my own portfolio are Diageo (LSE:DGE) and Reckitt Benckiser (LSE:RKT).
Should you invest £1,000 in Diageo right now?
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An ever-popular industry
Diageo may not be a household name but its brands are. From Bell’s whisky to Veuve Clicquot champagne, Diageo markets a wide range of popular alcoholic brands in 132 countries worldwide. The unwavering popularity of its products ensures a steady stream of revenue.
However, during times of economic tightening, the Diageo share price has struggled. This is typical of any company that markets higher-end products, as they can be the first items cut from shopping lists when times get tough.
But history has shown that when the market recovers, these brands usually do too.
Between 2003 and 2023, the Diageo share price has increased 565% from 570p to 3790p. During that period, the share price dipped occasionally in times of economic downturn but recovered rapidly.
That’s the kind of proven track record of consistent growth that makes for a reliable stock pick.
Some analysts estimate the Diageo share price to be trading at 24% below fair value, with earnings forecast to grow by 5.8% per year.
Like many well-established companies, Diageo operates with a high level of debt. This is usually not an issue when well managed, but could be risky if the economy is hit by further recession fears.
Recognising demand
The health and nutrition industry is another one that enjoys consistent demand. In fact, to some degree, one might say its demand is increased by the alcoholic beverage industry. Together, the two industries probably help to keep each other in business.
Reckitt Benckiser is a UK-based health, hygiene, and nutrition company that did exceptionally well between 1997 and 2017. The share price climbed over 1,000%, from £6.84 to almost £80. Its fortunes have been less favourable since, with the price fluctuating between £55 and £65 for the past few years.
However, it’s still recognised as one of the most reliable and in-demand health and nutrition firms in the country.
Today, the Reckitt Benckiser share price is estimated to be trading at 36.8% below fair value, with earnings forecast to grow 6% per year. A tough 2023 saw profit margins fall from 22.5% to 14.8%, yet the company still outperformed the overall UK market.
In October 2023, the company attempted to win back investor’s trust with a £1bn share buyback program but as yet the attempt hasn’t proven entirely successful. Still, I believe the move is representative of a company that is focused on working with shareholders when times get tough.
Diageo and Reckitt Benckiser both deliver consistent returns via a small yet reliable dividend. They may not be the most exciting stocks to buy but I consider them valuable additions to my portfolio.
