I am always looking for FTSE 100 shares to add to my portfolio. And after the recent stock market correction, several companies have fallen to levels that I believe look attractive compared to their potential.
Here are two companies that I would acquire for my portfolio with an investment of £2,000 today.
FTSE 100 shares
The first outfit on my list is the homebuilder Taylor Wimpey (LSE: TW).
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Shares in this company have faced selling pressure recently for several reasons. Investors have been dumping exposure to the homebuilding sector in general as it is facing growing liabilities from the cladding scandal. The government is trying to force developers to pay to remove dangerous cladding from buildings, which could become a multi-billion pound liability.
At the same time, rising costs are threatening Taylor’s profit margins.
While I cannot overlook these risks, I think they are only short-term headwinds. The UK housing market is structurally undersupplied, suggesting the demand for new homes will remain elevated. Taylor is one of a handful of big developers that has the size and scale to produce properties in the quantities the country requires.
As such, I believe this FTSE 100 company has a bright outlook in the long run. With these tailwinds behind the business, I would be happy to add the stock to my portfolio today as a long-term income and growth investment. At the time of writing, the shares also yield 3%.
Shares to buy for growth
Another FTSE 100 company that I believe is also benefiting from structural tailwinds is Pearson (LSE: PSON).
The education and training materials corporation is seeing a boom in demand for its products. The combination of the economic recovery and the rapidly digitising economy has provided a dual tailwind for the firm’s services.
According to its latest trading update, total group sales jumped 8% as virtual learning and qualification sales expanded at a double-digit rate.
Once again, I do not think these trends will come to an end any time soon. There will always be a need for training and education, especially as the world’s economy grows and develops. Major training and qualification providers such as Pearson also have a competitive edge because their brands are highly respected in the market.
That said, Pearson has faced pressure from smaller companies edging in on its turf in recent years. That is something I will be taking into account as we advance. These challenges are probably the most significant headwind to the group’s growth. It does not seem as if they will vanish any time soon.
Despite this risk, I am highly impressed by the FTSE 100 company’s recovery. I think there will be further growth from the business over the next year as the economy continues to reopen and more employees return to the workforce. In addition to these factors, the stock also yields 3%.
