Investing in top British stocks is my preferred way of building wealth for my future. Personally, I’d start by creating a balanced portfolio of blue-chip companies from the FTSE 100, operating across different sectors with different levels of risk.
I’d give serious consideration to these five from the FTSE 100, starting with China-focused bank HSBC Holdings. This has risks, as the business is caught up in the US-China power struggle, walking a tightrope to avoid being forced to take sides.
On the plus side, HSBC gives investors exposure to one of the fastest growing regions of the world, but with the security of the London listing. It trades at a tempting 11 times earnings, with a forward yield of 3.9%. I’d expect that to rise over time.
I’d buy these top British stocks
Pharmaceutical giant AstraZeneca has been caught up in all sorts of controversies over its coronavirus vaccines. That seems harsh given that it isn’t aiming to profit from them. Investors also fear it’s overpaying in the $39bn purchase of US biotech Alexion Pharmaceuticals.
As if that wasn’t enough, there’s been a shareholder revolt over CEO Pascal Soriot’s pay. Yet I think these temporary troubles give me a good opportunity to pick up a top British stock while it’s out of fashion. I’d then aim to hold for long-term income and growth.
I’d also consider another top British healthcare stock, Hikma Pharmaceutical. Its broad portfolio of essential medicines has given the company a good start to the financial year, despite lower demand for Covid-19 related products. Its share price has been choppy over the last five years, but its branded and generic businesses should deliver sustained growth.
Spirits giant Diageo has been a top British stock for years, and last year’s crash was a great time to buy. The Diageo share price is up more than a third since then, as investors bank on a recovery surge once people hit bars and restaurants again.
I still rate this FTSE 100 favourite
Management now plans to return £4.5bn in capital to shareholders, to celebrate its recovery. The spread of Covid variants are a risk, plus Diageo is expensive, trading at 29 times forward earnings. But then it usually is expensive, and there’s a good reason for that.
Finally, I’d include Britain’s biggest grocer Tesco. It trades at a tempting valuation of 12.3 times forward earnings, while the forward yield is now 4.43%, covered 1.9 times. Tesco is a top British stock but it does face challenges, amid concerns over what whether Amazon will disrupt this sector too.
Tesco had a good pandemic, but when people increasingly return to eating and drinking out, they’ll spend less in supermarkets. Aldi and Lidl remain constant irritants too. Yet management has faced down these threats before, and I’m banking Tesco will continue to deliver income and growth for the long term.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo, HSBC Holdings, and Tesco. 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 2021