The FTSE 100 Monday experienced a massive sell-off as traders were concerned about the potential impact of the Evergrand fall. While those risks haven’t completely gone away, most of the week has so far reversed those losses.
With the FTSE 100 recovery, which of the best stocks from the index for me to buy right now? I’ve been carrying two of my favorite shares for a long time. They are housebuilders Persimmon (LSE: PSN) and Warehouse Group Segro (LSE: SGRO). With the end of the stamp duty holiday (which will be later this month) the former may seem the opposite, but I think it’s a great company trading cheaply. As e-commerce expands, Segro is in a good position to keep growing.
A high yielding and cheap FTSE 100 shares
A dividend yield of 8% makes Persimmon ideal for me as an income-seeking investor. Yet the house builder has more than just passive dividend income. There are many prices and therefore the possibility of a share price increase. The share-to-earnings ratio is only 10 Berkeley Group But a little more expensive than that Belway And Barrett Developments.
Persimmon is reasonably higher quality though than the latter two and so it deserves a higher P / E to compensate for being a good business. The return on ROCE is 21. Belway and Barrett are eight and 14, respectively. This measure is important and the higher the better. This is important because it shows how efficiently a company can make a profit using its capital.
Persimmon also has higher margins than all these competitors. It is an FTSE 100 company that combines higher dividend yields and being cheaper with better operations and financial performance than its competitors.
To me, it’s a strong mix and the shares should look good even after the sector’s stamp duty holiday is over. Keep in mind that interest rates are likely to rise which could hit mortgages and create new housing demand instead. Nonetheless, I am interested in adding persimmons to my portfolio again for these reasons.
Going towards growth
Segro is an FTSE 100 quality-and-growth kind of investment. It’s not cheap but I think the long-term growth of e-commerce will see well that share prices will continue to rise.
It has about 20 ROCEs, indicating that management shareholder funds are well invested. Incidentally this is something that Warren Buffett is extremely valuable to, so it is an indicator of a potentially very good company and management team.
On top of that, it has seen strong revenue growth over several years and is likely to continue into the future, which is good news for shareholders.
The main concern will probably be competition. Making money from warehouses is not new and high margins can attract a lot of competition. But overall, no matter how well managed Segro is and it already has a massive size and strong customer relationship, it is an FTSE 100 company that I feel confident in investing.
Persimmon and Segro were then my top two chances from the FTSE 100 as it recovered from Monday’s recession.
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Coronavirus epidemic disrupts markets around the world …
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There is no mention of any shares owned by Andy Ross. Motley Flower UK has no position on any of the shares mentioned. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.