This month’s stock market crash has been a wild ride. The FTSE 100 has lost around 20% of its value in less than 30 days. The big cap index is now back at the same level it was 10 years ago.
This may seem like a poor advert for stock market investing. But I’d argue that it’s more likely to be a significant buying opportunity. The crash has dragged most companies down, without looking too closely at individual businesses.
However, when the market recovers, I expect stronger companies to regain their historical lead. Today I’m going to look at three FTSE 100 shares I’d buy for the next 10 years.
A defensive growth industry
I already own some shares in FTSE 100 pharmaceutical group GlaxoSmithKline (LSE: GSK). But I’m hoping to buy more while the share price is down. I’m pretty sure that demand for the group’s medicines – which include cancer treatments and vaccines – should continue to grow over the next decade.
Despite this, the GSK share price has fallen by about 15% so far this year. I’m pretty sure that’s a decent buying opportunity. Despite attracting investor criticism at times, Glaxo has actually outperformed the FTSE 100 by around 20% over the last 10 years. It’s also paid generous dividends.
The group has not yet issued a trading update relating to Covid-19, which suggests to me that its performance this year should not be severely affected by the pandemic.
The sell-off has pushed Glaxo’s dividend yield up to about 5.3% and left the stock trading on 12 times forecast earnings. I rate the shares as a buy at this level.
This FTSE 100 firm is up 130% in 10 years
Drinks giant Diageo (LSE: DGE) is another defensive business that’s hammered the FTSE 100 over the last decade. The Diageo share price has risen by 133% since March 2010, compared to a gain of just 3% for the FTSE 100.
Diageo’s products are even more profitable than those sold by GlaxoSmithKline. This is thanks to the reliable appeal of brands such as Gordon’s, Johnnie Walker and Guinness.
Of course, it’s not all plain sailing. Diageo expects to sales to fall by up to £325m this year as a result of the coronavirus pandemic. Operating profit is expected to fall by between £140m and £200m, depending on the timing of any recovery.
These numbers could get worse, in my view. But it’s worth remembering that the group’s operating profit last year was nearly £4.2bn. This business can take the hit without too many problems, thanks to high profit margins and a solid balance sheet.
Diageo isn’t the cheapest stock out there. Even after recent falls, the shares trade on nearly 20 times forecast earnings and yield just 2.9%.
However, this FTSE 100 stalwart has a fantastic track record of sustained growth. I suspect this will continue. I see this as a low-risk buy for a long-term portfolio.
