As 2022 has proved, investing can be tough. That’s why I think some of the best stocks for me to buy are those whose business models are easy to understand. By being confident that I know what I hold, there’s less chance of me selling out of confusion or worry at the very time I should actually be accumulating shares. Here are three I’d buy today.
Diageo
Due to its simplicity, global reach and bumper portfolio of brands, I reckon premium spirits purveyor Diageo (LSE: DGE) is one of the best companies in the FTSE 100. Notwithstanding this, shares in the company are down 13% year-to-date. Glass half-full, that looks like an opportunity to me.
Will Diageo shoot the lights out when market confidence returns? Probably not. The drawback with defensive stocks like this is that they tend not to jump in price on the way back.
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However, I’ve never regarded this lead index beast as one to buy for quick gains. More as one that gradually but confidently builds my wealth over time.
Sure, the price could fall, especially if we get some earnings downgrades as a result of drinkers’ tightening their belts in the face of rising costs. But unless I believe consumers will never return to their favourite tipples (I don’t), this should be nothing more than a temporary blip.
Domino’s Pizza
Also making my list of stocks to buy now is Domino’s Pizza (LSE: DOM). In case you weren’t aware, Domino’s is the UK’s leading pizza brand, boasting over 1,200 restaurants across here and the Republic of Ireland. According to the company, it sold over 105m pizzas last year.
Of course, an easy-to-understand business doesn’t guarantee anything in terms of performance. Like Diageo, Domino’s’ price has lost height in 2022. The rise in the cost of living is likely the biggest contributing factor. Despite recovering slightly in the last couple of months, shares are still down 25%. News that CEO Dominic Paul is off to Premier Inn-owner Whitbread probably isn’t helping sentiment.
Still, at 14 times earnings, I think a lot of negativity looks priced in. In June, the company said it continued to expect full-year earnings per share to be “in line with current market expectations“. A 3.7% dividend yield should make up for the short-term headwinds.
Rentokil Initial
A final ‘simple’ stock I’d be happy to buy today is Rentokil Initial (LSE: RTO). While its line of work isn’t the most pleasant, it strikes me as the sort of company that will rarely see a dip in demand. The £9bn-cap is the world’s leading commercial pest control and hygiene services provider.
Another thing I like about Rentokil is that 90% of its revenues come from outside of the UK. In theory, this would help to reduce some risk in my portfolio by taking the strain off of my more home-focused picks.
The question mark for me here is the valuation. Despite falling 12% in 2022, the shares still change hands at almost 26 times earnings. Although I can’t expect to pay a low price for a very defensive company, there’s a risk other investors will continue selling growth-oriented stocks if the tough economic times continue.
But, naturally, no one knows what happens next. So perhaps drip-feeding my money would be most appropriate here?
