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You want the best FTSE 100 stocks to buy this month? Here are two high quality chips on my watch list.
BAE Systems
It's not just US technology stocks that have sold off in recent weeks. Security stocks also fell as investors began to lock in gains following earlier share price strength.
As I write, BAE Systems' (LSE:BA.) share price has fallen 7% in the past month. I think this pullback represents an attractive opportunity for me to open a position.
This FTSE 100 share is one of the world's largest defense contractors. It supplies military equipment around the world, and is a key supplier to the US and UK armed forces. And it is enjoying record orders as global rearmament rises at the fastest pace since the Cold War.
Sadly, the world's level of tension means that the demand for weapons is likely to increase further. Sir Roland Walker, the head of the British Army, said it must renew its military capabilities in 2030 to combat the perceived threat of China, Russia and Iran. Expect the weapons budget to continue to grow.
City analysts expect BAE Systems to report strong earnings growth over the next few years at least. A predicted increase of 7% this year is followed by predicted increases of 12% and 10% in 2025 and 2026 respectively.
With a forward price-to-earnings (P/E) ratio of 18.3 times, BAE Systems shares are still trading at a premium to the broader FTSE 100. the giant deserves this premium.
The Berkeley group
Home builders love it The Berkeley group (LSE:BKG) remains under pressure from higher than normal interest rates. While this remains an ongoing threat to housing demand, the fall in inflation means the Bank of England could cut rates several times next year.
Encouragingly, mortgage rates are also falling in what some say is a sign of an improving environment for homebuyers.
Last week, Nationwide became the first lender to offer a rate below 4% for the first time in years. Industry experts think that this could lead to a new race between lenders that could stimulate the market.
This is not the only good news that Berkeley has received recently. After the general election, Labor confirmed its plan to build 1.5m new homes between now and 2029. A firestorm of planning regulations to make this a reality could increase the profits of housebuilders for years to come.
Berkeley isn't out of the woods yet, of course. City analysts expect annual revenue to fall by 7% and 6% in the next two financial years before picking up again after that.
But with a forward P/E ratio of 14.2 times, Berkeley is cheaper than its FTSE 100 rivals, and could be a better way for value investors like me to capitalize on the housing market recovery.
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