As the UK economy continues to recover from the coronavirus pandemic, I’ve been looking for FTSE 100 shares to buy now that may benefit from this comeback.
The FTSE 100 isn’t really a UK index. More than 70% of its profits are earned outside of the country. This can be both a benefit and disadvantage for investors.
On the one hand, it’s pretty easy to build international diversification by investing in these blue-chip stocks. On the other hand, if investors want exposure to the UK economy, the FTSE 100 index isn’t really the best place to look. The FTSE 250‘s a better gauge of British business activity.
Still, there are plenty of companies in the index that have both a UK and international presence. It’s these I’d focus on buying for my portfolio.
Blue-chip shares to buy now
The first group on my list is the UK fashion retailer Next (LSE: NXT). At the beginning of the pandemic, this business shut all of its stores almost overnight. When service resumed, the company was still so busy it had to limit orders.
That’s because its technology and fulfilment investments over the past five years have paid off over the past 12 months. Online sales have boomed as consumers’ options were limited. And I think the FTSE 100 company is now primed to take advantage of the UK economic recovery.
According to its latest trading update, full-price sales in the 11 weeks to 17 July were up 18.6% versus 2019 levels. It now expects to earn a profit of around £750m for the financial year, which is significantly above initial projections.
As Next continues to grow, I think this is one of the best shares to buy now. That’s why I’d buy the blue-chip business for my portfolio. Some risks it may face as we advance and include rising costs and a slowdown in consumer spending.
FTSE 100 growth champion
Another company I’d buy is Rightmove (LSE: RMV). I think this is one of the country’s best technology firms. It owns the rightmove.com property portal, which is one of the most visited websites in the UK.
Even though the property market has boomed over the past 12 months, Rightmove has still suffered disruption. As economic activity returns to normal levels, I reckon sales and earnings at the enterprise will stabilise. This predictability should allow management more scope to invest for growth and return capital to investors.
The UK property market’s structurally undersupplied, and it doesn’t look as if that’ll change anytime soon. I think this will remain a tailwind for the enterprise for many years to come. That’s why I’d buy the FTSE 100 firm and rate it as one of the best shares to buy now.
Some challenges it may face in the future include a property market slowdown and competition from newer startups.
Schroders (LSE: SDRC) is one of the UK’s largest and most storied asset managers. It looks after more than £700bn of assets for clients worldwide, and this total is expanding.
According to the company’s half-year results, assets under management increased 6% during the first half of the year.
The company’s main business is located in the UK, but it also has a presence in the US and Asia. As the global economy picks up from the pandemic, I think the demand for the group’s services will grow in all of these markets. With its global footprint and reputation, Schroders should be able to capitalise on this growth.
The group also benefits from economies of scale, thanks to its size. Demand for higher-margin products helped the company report a 37% increase in profit before tax for the first half.
With further growth on the horizon, I think this is one of the best stocks to buy now for my FTSE 100 portfolio.
Some risks it could face include competition and regulations, which could impact overall profitability.
FTSE 100 international exposure
Flutter Entertainment (LSE: FLTR) has grown into one of the world’s premier gambling companies. Using experience gained in its home UK and Ireland markets, the enterprise has been diversifying into the US.
It’s already the number-one online sports betting operator in this market, and management believes there’s the potential for substantial growth in the years ahead.
As a gambling company, Flutter might not be suitable for all investors. There will always be the threat of additional regulation for the sector, which could impact profitability. In the case of the US, authorities could decide to outlaw online betting again, eliminating the group’s growth story.
Despite this risk, I’d buy the FTSE 100 company considering its growth track record and potential. Revenues jumped 99% in the first half of 2021. While past performance should never be used as a guide to future potential, this number suggests Flutter’s growth story is only just getting started.
Best industrial share to buy
The final FTSE 100 company I’d buy is the industrial group Johnson Matthey (LSE: JMAT). This is another business with a UK and international footprint. The corporation manufactures chemicals and sustainable technologies for clients around the world. As you’d expect, its fortunes are tied to economic cycles as customers tend to place more orders in periods of economic growth.
Last year was one of disruption for the group, but it’s experiencing a recovery in 2021. In its latest trading update, Johnson Matthey’s management noted that due to the strength it’s seeing in its end markets “we now expect at least mid teens growth in underlying operating performance.“
This suggests the enterprise will report strong growth this year as it capitalises on the economic rebound. This is why I think it’s one of the best shares to buy today for the UK recovery.
The enterprise has warned that higher metals prices or other costs could impact its growth for the year, so this is a risk I’ll be keeping an eye on.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Flutter Entertainment, Flutter Entertainment PLC, and Next. The Motley Fool UK has recommended Rightmove and Schroders (Non-Voting). 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.
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