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Best shares to buy: I’d only pick 1 of last week’s FTSE 100 top performers

Cliff D'Arcy
·3-min read
Illustration of bull and bear
Illustration of bull and bear

Almost a fortnight into 2020 and the FTSE 100 index has got off to a pretty good start to the year. Since the stock market opened on Monday, 4 January, the Footsie has added around 290 points, for an early gain of 4.5%. But which blue-chip shares have got off to a flying start? Let’s find out which were the ‘best’ shares to buy a week ago from the FTSE 100.

FTSE 100: top performers

For the record, these are the six best-performing FTSE 100 shares over the past week:

  1. BP +11.9%

  2. Standard Chartered +9.7%

  3. HSBC Holdings plc +9.0%

  4. Glencore +8.8%

  5. Hargreaves Lansdown +8.4%

  6. Barclays +7.7%

Looking at this list of the best shares to buy a week ago, there’s one clear theme. Three of the six — Standard Chartered, HSBC and Barclays — are banks. Clearly, with Covid-19 vaccines being rolled out in 2021, investors are expecting an economic rebound after lockdowns are relaxed. With strong economic growth expected in the second half of the year, it makes sense to buy economically sensitive shares and cyclical stocks. When consumers start spending again and company earnings rise, bad debts and loan losses should ease off. This would be good news for beaten-down banks, whose shares took a battering in 2020. But my best share to buy from this list isn’t a bank, so let’s move on.

Which would be my #1 share to buy?

At #4 on my list is Anglo-Swiss commodity trader and miner Glencore. The group produces and markets over 60 commodities in over 35 countries, including metals, coal, oil and gas. However, Glencore had a difficult 2020, cancelling its dividend as net debt soared close to $20bn. Although the price of copper — Glencore’s core commodity — has soared since March, and Glencore’s dividend is set to return this year, I’d rate its shares as a hold right now.

Hargreaves Lansdown is the UK’s leading savings and investment platform. Founded 40 years ago, HL now has over 1.44 million clients. This includes me, as I rate HL’s customer service among the best I’ve ever received. With asset prices soaring in H2/2020, HL’s assets under management now exceed £100b.n But its shares trade on a price-to-earnings ratio of around 25 and a dividend yield of 2.3%. Although I love HL, these fundamentals mean it’s not one of my best shares to buy.

BP is my pick of the crop

For me, the best risk/reward ratio among these six winners comes from oil & gas supermajor BP. With the Brent Crude oil price leaping above $56 today (from a low below $16 last April!), I see scope for a continued recovery in the BP share price. At its 2020 low on 28 October, the BP share price had collapsed to close at 188.52p. Since then, BP shares have surged and currently trade around 303.9p, valuing the business at £61.4bn. That’s still down almost two-fifths (38.9%) over the past 12 months, leaving plenty of room for improvement. With an attractive dividend yield of 5.1% a year and still £2 cheaper than a year ago, BP is my best share to buy from these six FTSE 100 candidates for a big bounce-back in 2021!

The post Best shares to buy: I’d only pick 1 of last week’s FTSE 100 top performers appeared first on The Motley Fool UK.

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Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, and Standard Chartered. 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