I’m on the hunt for the best stocks on the market! I think I may have just found them

This Fool is on the lookout for the best the stock market has to offer. He reckons these two could be solid candidates.

| 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.

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.

Investing in the stock market can be difficult. Nowadays, there’s so much information available to investors promoting things such as get-rich-quick schemes.

I’m blocking all that out. I invest in the market to build my wealth over time. I want top-quality businesses in my portfolio that I believe can perform strongly over a long stretch.

The stock market is vast, but I’ve put most of my energy into focusing on FTSE shares, which have gone on a tear this year. I like what I see with these two.

GSK

First is pharmaceutical giant GSK (LSE: GSK). The stock has taken full advantage of the market rally. It’s up 11.6% so far this year.

But with its share price sliding around 5% in the last week, I reckon now could be a time to swoop in and buy some shares. It trades on 15.1 times earnings. I see that as good value for a high-quality business.

GSK is on my list due to its defensive nature. Regardless of external issues such as a weak economy, people will always need access to medicine and treatments.

That’s not to say the stock is risk-free. For example, some market spectators have concerns about the firm’s drug pipeline. The company has underperformed compared to its peers recently. Furthermore, it’s facing further legal trouble surrounding heartburn drug Zantac, which sparked its fall recently.

But with it now having nearly 90 products in its R&D pipeline, it seems the firm is turning a corner. As such, analysts have its earnings growth rising from 3% this year to 10% and 11% in 2025 and 2026 respectively. Its 12-month price target is £19.51, which represents an 18.1% premium from its current price.

I like to target income. Therefore, its 3.6% yield, in line with the Footsie average, is also attractive.

Diageo

I also think one of the market’s best offerings right now is Diageo (LSE: DGE). Unlike GSK, its share price has faltered lately. It’s down 5.8% year to date. Diageo shares have lost 20.7% of their value in the last 12 months.

The spirit maker has struggled as consumers have cut back on splashing out on its premium brands in favour of cheaper alternatives given the current economic environment. Sales have been hit especially hard in the US, which is the company’s largest market.

But I still see an incredibly strong underlying business. The company owns high-quality names such as Guinness and Captain Morgan. In the years to come, I think demand for its products will steadily grow due to rising wealth in developing countries.

With its share price struggling, investors can now pick up Diageo shares trading on 19.2 times earnings. That’s above the Footsie average (11) but considerably lower than its historical average of around 24.

To go with that, the stock has a 3.1% yield. That may not seem enticing given some of the higher yields available on the Footsie. However, it has increased its payout for 37 years on the trot, which is an incredible record.

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.

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo Plc and GSK. 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

Bearded man writing on notepad in front of computer
Investing Articles

Could a 2025 penny share takeover boom herald big profits for investors?

When penny share owners get caught up in a takeover battle, what might happen? Christopher Ruane looks at some potential…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

3 value shares for investors to consider buying in 2025

Some value shares blew the roof off during 2024, so here are three promising candidates for investors to consider next…

Read more »

Investing Articles

Can this takeover news give Aviva shares the boost we’ve been waiting for?

Aviva shares barely move as news of the agreed takeover of Direct Line emerges. Shareholders might not see it as…

Read more »

Investing Articles

2 cheap FTSE 250 growth shares to consider in 2025!

These FTSE 250 shares have excellent long-term investment potential, says Royston Wild. Here's why he thinks they might also be…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Has the 2024 Scottish Mortgage share price rise gone under the radar?

The Scottish Mortgage share price rise has meant a good year for the trust so far, but not as good…

Read more »

Investing Articles

Will the easyJet share price hit £10 in 2025?

easyJet has been trading well with rising earnings, which reflects in the elevated share price, but there may be more…

Read more »

Investing Articles

2 FTSE shares I won’t touch with a bargepole in 2025

The FTSE 100 and the FTSE 250 have some quality stocks. But there are others that Stephen Wright thinks he…

Read more »

Dividend Shares

How investing £15 a day could yield £3.4k in annual passive income

Jon Smith flags up how by accumulating regular modest amounts and investing in dividend shares, an investor can build passive…

Read more »