£3k to invest today in an ISA? I’d buy these pandemic-proof FTSE 100 stocks

If I had £3,000 to invest tax-free in an ISA, I’d look for FTSE 100 stocks in this sector being shielded by the government.

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.

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.

If I had £3,000 to invest today, I’d be looking for FTSE 100 stocks that should hold steady even if the pandemic drags on. I think the housebuilding sector offers that opportunity, because it’s effectively being underpinned by the government.

Yesterday, prime minister Boris Johnson announced new measures to help first-time buyers onto the property ladder, creating ‘Generation Buy’ by offering young people low-deposit mortgages. The aim is to fix the problem of unaffordable deposits, where buyers cannot scrape together the necessary 15% deposit most lenders demand.

It will help fix FTSE 100 housebuilding stocks too. They’ve all climbed today as a result, and this isn’t the only state aid ministers are offering.

These FTSE 100 stocks are underpinned

Sometimes it feels like the government’s number-one priority is to rush to the rescue of the housing market. Chancellor Rishi Sunak’s stamp duty holiday is driving activity, with Nationwide reporting that house prices climbed 5% in the year to September. That’s the fastest growth in four years, despite today’s massive health, jobs, and economic crisis.

The Help to Buy scheme is also propping up demand for new-build properties, and although that will be scaled back from next spring, it may be extended. Then there’s the Lifetime ISA, which gives first-time buyers a 25% bonus, worth up to £1,000 a year, when saving towards a deposit. Throw in all-time low interest rates, and the total stimulus is colossal.

The cumulative effect is to drive UK house prices to a record high of £226,129, Nationwide figures show. Which is great news for FTSE 100 stocks exposed to the property market, primarily housebuilders of course.

Yesterday, the UK’s biggest housebuilder Barratt Developments saw its share price jump 4.13%. It’s now up more than 27% in the last six months. Similarly, FTSE 100 stock Vistry Group jumped 3.78% yesterday, and trades 14% higher than six months ago. Persimmon jumped 2.41% and is now up an astonishing 56% in the last six months.

Berkeley Group Holdings saw a smaller gain of 1.33% yesterday but is, nonetheless, up almost 30% over six months. Taylor Wimpey is the sluggard among these FTSE 100 stocks, up ‘just’ 7% in six months.

These FTSE 100 stocks were on the front line of the Brexit shock, and the same happened when coronavirus struck. The housing market effectively locked down. But that seems to have created pent-up demand, rather than destroying it.

Build your wealth in an ISA

Given the shortage of supply and the high demand for property, it will take major upheaval for prices to crash. Quite frankly, the government isn’t going to allow it.

Despite this, the housebuilders still look relatively cheap. Barratt is trading at 12.46 times earnings, Persimmon at 9.51 times, Vistry at 5.73 times, Berkeley 13.41, and Taylor Wimpey at just 5.38 times. Most have been cutting dividends but, hopefully, they will be restored once the worst of Covid is behind us.

In the meantime, demand for property looks set to remain healthy, as do the long-term prospects for housebuilders. They’re not as cheap as they were during the stock market crash in March, but these government-pampered FTSE 100 stocks still look tempting today. If I was putting £3k, or any other sum, into a tax-free Stocks and Shares ISA, I’d check them out.

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.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Is now the time to buy BP shares? Here’s what the charts say

The best time to buy shares in a company is when they’re trading at a discount. But the future is…

Read more »

Investing Articles

Here’s how I’d use £50K to aim for a million when the stock market crashes

Seeing a stock market crash as a buying opportunity could prove lucrative for a well-prepared, long-term investor. Christopher Ruane explains…

Read more »

Stack of one pound coins falling over
Investing Articles

It’s up 27% with a P/E of 9! I’m considering the potential of this blossoming penny stock

Despite several years of losses, this UK penny stock has an impressive valuation. I’m looking to see if it could…

Read more »

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »