With the FTSE 100 starting the year so strongly, I’m on the lookout for more shares to add to my portfolio.
The index has continued to outdo itself this year, reaching multiple new highs. However, I still think scattered among its constituents are a number of bargains.
Here are two I really like the look of today. If I had the cash, I’d pick them up.
Marks & Spencer
The first is Marks and Spencer (LSE:MKS). After posting an incredible performance in 2023, the stock has slowed this year. Year to date, it’s fallen by 0.3%. But I think now could be a smart time to snap up some shares.
What’s impressed me most about the company in the last few years is the magnificent turnaround it has performed. M&S has often been associated with high quality. However, the company seemed to be stuck in the past.
But under the leadership of Stuart Machin and his predecessor Steve Rowe, the company’s catapulted into the 21st century. Sales are strong and profits are rising as a result. In its latest half-year results, it revealed profit before taxed had climbed 56.2% to £325.6m.
As a result, many brokers are now bullish on the stock. For example, JP Morgan recently lifted its target price to 330p from its current price (275.1p), representing a 20% premium.
Of course, that’s just a forecast. And Marks and Spencer still faces threats. Consumers’ pockets are still feeling the effect of racing inflation, and this will continue in the months ahead. That could harm sales.
But trading at 14 times earnings, I think the stock looks reasonably priced. Its share price rose nearly 100% last year. I’m not expecting a similar performance going forward, but I’m confident the business can keep going from strength to strength.
Unilever
The second stock on my radar is Unilever (LSE:ULVR). Unlike its counterpart, it’s started 2024 strongly, rising 11.9%.
There are two main attractions for me with Unilever. The first is its dividend yield. At 3.4%, it’s nowhere near the highest available to investors.
But it has an incredible track record of not cutting its payout for over 50 years. Given dividends are never guaranteed, a record like that is worth its weight in gold. It gives me a lot more confidence that Unilever will continue to reward shareholders.
The second attraction is its defensive nature. The goods it sells are essential. Around 3.4bn people use its products every day. That means regardless of the economic environment, there should always be steady demand.
That said, the biggest risk to Unilever is competition. While the products it offers are essential, many are premium brands, which come at a premium cost. Therefore, given the cost-of-living crisis, there’s a risk consumers switch to cheaper alternatives.
However, Unilever has proven over the years that it has strong pricing power. For example, last year, underlying sales grew 7% even despite prices jumped 6.8%.
Looking ahead, interest rate cuts should provide sales with a boost. Trading on 19.4 times earnings, I think Unilever shares are good value for money. That’s below its long-term historical average of around 25.
