FTSE 100 is the UK’s largest 100 listed companies by market capitalisation. It’s home to globally recognised giants, many of which were established several decades ago. FTSE 100 companies represent over 80% of the market value of the London Stock Exchange and are widely seen as a barometer for the UK stock market.
However, I would say that FTSE 100 stocks are not representative of the UK economy. Roughly two-thirds of its earnings come from overseas. This is a positive attribute in my opinion. Global companies provide diversification and allow for exposure to higher growth areas around the world.
A FTSE 100 consumer staple
One such globally diversified FTSE 100 giant is Unilever (LSE: ULVR). Operating in around 190 countries and owning over 400 brands, Unilever has fingers in many pies. This multinational consumer goods company operates in sectors including foods, drinks, and household goods.
Many of us may use Unilever’s products without knowing. They own many well-known brands including Dove, Lynx, Hellmann’s, and Ben & Jerry’s. A steady stream of customers purchase these strong brands frequently and often. These characteristics, commonly found in the consumer staples sector, have long been a favourite of world-renowned investor Warren Buffett.
Unilever is a high-quality company that I would invest in this October for my retirement fund. I would probably go as far as saying that it is my favourite consumer staples company in the FTSE 100 index. I like that it has a return on capital of over 18%, and an operating margin of over 17%. It even provides a healthy dividend of around 3%.
Its earnings growth is a little low in my opinion, but it’s important to note that this isn’t a growth stock. Slow and steady can win the race in the long run, which is why I’d be happy to buy shares in Unilever to help aid my early retirement plans.
Another FTSE 100 stock that I’d buy in October is Fresnillo (LSE: FRES). This metals and mining company may be less familiar than the brands I mentioned above. However, Fresnillo is one of the world’s largest silver mining companies and one of Mexico’s largest gold miners.
So why did I select it as a possible FTSE 100 stock purchase? One reason is to gain some exposure to gold and silver prices. Central banks around the world have provided much extra liquidity this year to counteract the effects from Covid-19 related disruption. The effects of which increase the purchasing power of gold and silver. As such, demand for gold and silver has increased this year.
As the gold and silver prices increased this year, so did Fresnillo’s share price. Rising by over 80% so far this year, Fresnillo is currently the second-highest performer in the FTSE 100. In recent months, the share price has dipped slightly. I think this could be a good opportunity to buy some shares this October.
Mining companies can often be volatile, but Fresnillo looks like one of the more financially stable ones to me. With strong revenues, rising profits, and well-invested mining assets, it looks well placed to capitalise on rising gold and silver prices.
The post £5,000 to invest? 2 FTSE 100 stocks I’d buy in October appeared first on The Motley Fool UK.
Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK has recommended Fresnillo and Unilever. 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.
Motley Fool UK 2020