For decades, changes in economic cycles meant investors switched between defensive and cyclical stocks. Cyclicals typically did better during growth periods. During slumps, people would buy into defensive stocks instead. But due to the pandemic, new buckets of stocks are emerging. For example, a ‘stay-at-home’ basket versus a ‘back-to-work’ one. My top FTSE 100 stock to buy for the former basket is Kingfisher (LSE:KGF).
Even with the vaccine being distributed, I’d be surprised if people resume normal life any time soon. The UK has vaccinated around 2.4m people so far. The thinking is that it’ll take a year on the current run-rate to complete the whole nation. Even with this, I’ve seen reports from several companies that are now moving to remote working regardless of the virus, or at least giving staff the option to. With those thoughts, I don’t see FTSE 100 stocks such as Kingfisher going out of fashion in the short or mid term.
Kingfisher: the King of DIY
Kingfisher own several brands that you’ll know. These include Screwfix and B&Q. As such, it’s one of the main companies that consumers go to for DIY projects and general home improvements. Over the course of the past year, lockdowns have meant that lots of us have been spending more time at home. I’m one of those people who’ve been trying their hand at DIY, although you might not consider my end results at home as improvements!
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The bottom line is that Kingfisher has proved to be a top FTSE 100 stay-at-home stock during this period. The financials show this, with figures out this week showing a 16.9% boost in sales for Q4. This is on top of the 17.6% rise in sales seen during Q3. Even with some temporary store closures, digital sales stepped in and were up 150% year-on-year.
Such figures have driven the share price higher. Since the lockdowns started in March 2020, the share price has more than doubled to current levels around 284p. This is a reflection not only of the improved results, but also as investors buy into the broader idea of a home-working/DIY society for the future.
Although I’ve spoken about Kingfisher here in the UK, it does also have a presence abroad. In particular, France is seen as a growth market going forwards. As with any business, having a diversified operating platform will help to offset any drop in a particular market or cost increase (such as from Brexit).
A top FTSE 100 stock for 2021?
Obviously, I’d have preferred to buy Kingfisher last year. Hindsight is a wonderful thing. But I do feel that there’s more upside not just for Kingfisher, but for other top FTSE 100 stay-at-home stocks. I feel that people are now used to working from home and have a DIY mindset. This should see product demand for home improvement stores staying firm.
So in terms of getting exposure to the theme of staying at home, I see Kingfisher as the stock I’d buy when looking in the FTSE 100.
