The stock market can be a daunting place. And while the FTSE 100‘s climbed 6.3% in 2024, its rise hasn’t been plain sailing.
We’ve seen increased volatility in the last couple of months. Naturally, that can deter new investors from dipping their toe into the market. However, it shouldn’t.
Keeping it simple
With more volatility comes plenty of noise surrounding the markets. But I like to block it all out. Instead, I like to remember what investors such as Warren Buffett would say. He’s without a doubt one of my favourite stock pickers.
His long-term approach to buying companies aligns with my investment strategy. On top of that, over his eight decades of investing, he’s provided retail investors with plenty of brilliant advice.
One piece that has resonated with me is to make investing as simple as possible. To achieve that, he says we should buy companies where we easily understand how they make money and add value. Over the long run, these companies tend to be strong performers. During times of volatility, and for new investors, I think that message is especially important.
Marks & Spencer
That’s why I reckon Marks & Spencer (LSE: MKS) is a good stock to consider buying. The stock’s up 61% in the last 12 months and 77% in the last five years, far outperforming the FTSE 100.
That’s not to say the business hasn’t faced challenges along the way and won’t continue to do so. The fragile nature of the economy poses a constant threat to M&S over the past couple of years. For example, we’re not out of the woods yet with inflation. On top of that, it was announced today that the UK economy failed to grow in July. That could impact consumer confidence.
However, as a long-term buy, I like the look of Marks & Spencer. Firstly, as a retail giant, it’s easy to understand how the business generates money.
Furthermore, it has made great strides in recent times to turn itself around. After falling behind its competition, a fresh strategy focused on boosting both its in-store and online presence has revived the business.
Trading on a price-to-earnings (P/E) ratio of 17.1 and a forward P/E of 13.3, I think the stock also looks like decent value.
Diageo
My second pick is Diageo (LSE: DGE). Unlike Marks & Spencer, the alcoholic beverage giant has suffered in recent times. It’s down 24% in the last 12 months and 26% in the last five years.
The main catalyst for its downfall has been a profit warning issued last year, which came after a drop in Latin American & Caribbean sales.
With an ongoing cost-of-living crisis, many consumers have decided to switch to cheaper alternatives from the higher-end names Diageo sells or stop drinking altogether. Moving forward, this will continue to be a threat.
But for investors with the bigger picture in mind, I think Diageo shares could be a steal. With premium brands under its umbrella, I’m confident the business will excel in the years and decades to come. That’s especially when we begin to see further rate cuts, which will boost spending.
Alongside that, the stock also looks cheap with a P/E of 18.4. That’s below its historical average of 22.4.
