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If I could only own 5 FTSE 100 shares, here’s what I’d buy

Rupert Hargreaves
·3-min read
FTSE 100 (London Stock Exchange Share Index) on Gold Coin Stacks Isolated on White
FTSE 100 (London Stock Exchange Share Index) on Gold Coin Stacks Isolated on White

Today may not seem to be the right time to buy FTSE 100 shares. The weak economic outlook and risks such as Brexit could prompt a second stock market crash. This may cause investors further losses in the near term.

However, many high-quality companies are currently trading at low prices likely to recover in the coming years. Nowhere is this more apparent than in the FTSE 100. Many of the UK’s largest listed businesses are currently trading at multi-decade lows.

This could mean that now is the perfect time to start investing for the long term. I think many of these companies will see their valuations recover in the following years. Therefore, one may benefit from buying a diversified portfolio of these businesses while they trade at depressed levels.

With that in mind, here are the five FTSE 100 share I’d buy today.

FTSE 100 shares to buy

There are only a handful of blue-chip tech stocks in the FTSE 100. One of these is Just Eat Takeaway.com. The European food delivery giant has seen the value of its shares surge over the past few years as consumers have rapidly shifted to online ordering.

The coronavirus crisis has only accelerated this theme. Analysts are expecting the business to report a doubling of net profit in the next two years. The firm is also pursuing a £5.8bn tie-up with US rival Grubhub. This could help turbocharge growth in the years ahead.

Two other FTSE 100 shares I’d consider buying right now are BHP and Rio Tinto. In my opinion, over the next few years, as the world recovers from the coronavirus crisis, the demand for raw materials will boom. This is already happening in some markets.

The prices of iron ore and copper have jumped this year off the back of rising demand from China. Rio and BHP should profit from this growth. And considering the two companies’ track record of returning cash to investors, this implies there could be large dividends on the cards during the next two years.

Dividend income

Talking of dividends, I think one should also consider Direct Line. One of the UK’s largest insurance companies, Direct Line operates an essential service. Its reputation helps attract customers, and the group’s size means costs can be kept low, which provides a competitive advantage.

Thanks to rising profits, analysts are forecasting a near-8% dividend yield from the group this year. That looks highly attractive in the current interest rate environment.

Finally, I think one should also look at Halma for a basket of FTSE 100 shares. This distributor of health and safety equipment has refined a highly successful growth model over the past decade. The firm has been buying smaller competitors and reinvesting cash flow to drive organic growth.

Thanks to these initiatives, the firm’s income has multiplied over the past decade. As long as management sticks to the tried-and-tested method of growth, I reckon this trend will continue.

The post If I could only own 5 FTSE 100 shares, here’s what I’d buy appeared first on The Motley Fool UK.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Halma and Just Eat Takeaway.com N.V. 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