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The foundation of my investment strategy is buying FTSE 100 sharing the purpose of holding for decades. Far from excitement. But it works.
When I look at the leading index in the UK right now, I see a large number of unimportant stocks. There are many buying opportunities that I think investors should consider taking advantage of.
In fact, there are so many that sometimes it can be difficult to choose a couple. That said, if I had the money today, here are two Footsie stocks I would buy hand over fist.
NatWest
I will start NatWest (LSE: NWG). The bank has been very sad lately. Year to date, the stock is up 52.1%. Over the past 12 months, it has increased by 42.1%.
By comparison, the FTSE 100 rose 6.5% and 7.9% during the same periods. But even after its dramatic rise, I still see value in NatWest.
That's because the stock looks cheap. It currently trades at a price-to-earnings (P/E) ratio of just 7.1. That is well below the FTSE 100 average of 11. Looking ahead, its forward P/E is 7.8. While that is a bit high, it still represents a great value, in my opinion.
I'm also a fan of NatWest for its dividend yield, currently sitting at 5.2%. I realize that benefits are not guaranteed. But NatWest's payout is almost three times covered by profits. In addition, its dividends rose 26% last year, to 17p per share.
As the bank's momentum has been growing in recent times, it's easy to see why the stock price is rising. Second quarter profits rose more than 25% to £1.3bn. Investors were also delighted to hear that the company had acquired a £2.5bn portfolio of UK residential mortgages from competitors. Metro Bank.
The biggest risk for NatWest is interest rates. Not only does it fuel economic uncertainty, but rising prices mean less margins. That will reduce NatWest's profits.
But at its dirt cheap price, I'm a fan of the stock.
Diageo
I Diageo (LSE: DGE) performance has been a big differentiator for NatWest. Year to date, the stock is down 11.3%. Over the past 12 months, the soft drink giant has lost 19.4% of its value.
But I'm not writing it yet. And trading at a P/E of 19.3, I see value in its shares. Yes, that is above the average of the FTSE 100. That said, it is below its long-term historical average of more than 22.
The stock may continue to suffer in the coming months. The business issued a profit warning earlier this year, which sent the share price soaring. And as the cost of living crisis continues, there is a risk that consumers may switch to cheaper alternatives, if Diageo focuses on premium brands.
But in the coming years and decades, I think Diageo can succeed. The price cuts will improve spending and with premium names under its umbrella, I support the company in the long run.
There is also a 3.1% yield on offer. That's below the Footsie average. However, Diageo has a strong track record of consistently rewarding shareholders.
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