The stock market can be difficult to navigate. But by opting to purchase FTSE 100 shares, I believe a lot of the difficulty surrounding investing can be minimised.
The index is home to some of the strongest-performing businesses in the UK. This New Year, I’m scanning the Footsie for some shares I can buy today and, hopefully, hold onto for the decades ahead.
Barclays
When investing, a key is to diversify. By doing this, I offset risk. That said, I see plenty of value in the financial sector at the moment. Therefore, I’m turning my attention to Barclays (LSE: BARC).
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Last year didn’t prove to be the most fruitful spell for Barclays shareholders. During 2023, its share price slid by around 10%. I added to my position numerous times across the year. As I write, I’m sitting on a 7.3% gain. But I’m not worried about these short-term gains. I see real long-term value in the stock.
What draws me to it most is the fact it looks incredibly cheap. Today, it trades on just 4.5 times earnings. On top of that, its price-to-book ratio is a mere 0.35.
While it looks cheap, I do have my concerns. Interest rates will heavily dictate the bank’s performance in the months to come. Lower rates should provide the firm with a boost as falling rates will mean an uplift in investor sentiment. We saw this in action towards the tail end of 2023, as it seems rates have now peaked.
However, falling rates also impact the bank’s net interest margin. Last October, it downgraded its full-year guidance by around 0.1% to 3.05%. Its share price lost 7% as a result. This will be something to keep an eye on.
Regardless of that, while the months ahead may be choppy, I think Barclays shares are too cheap to ignore. I’ll be looking to top up with any spare cash.
HSBC
Another stock that’s on my radar is HSBC (LSE: HSBA). I’ve had the global bank on my watchlist for some time now. I think it could be a smart time to swoop in and buy some shares.
Like Barclays, it looks cheap. It trades on just six times earnings, which is nearly half the FTSE 100 average. Additionally, it has a dividend yield of 5.2%. I could take this income and reinvest it. In turn, I’d benefit from compounding, meaning I’d earn interest on my returns as well as my initial investment. Of course, it’s worth noting that dividends are never guaranteed.
I’m also a fan of HSBC for its international presence, especially in Asia. The Asian commercial banking sector is predicted to grow exponentially in the next 10 years. As such, HSBC has allocated $6bn for investment in China, Hong Kong, and Singapore to 2025.
That said, investment in this region does come with risks. Firstly, ongoing geopolitical tensions with the West are a threat. On top of that, a flagging Chinese property market, which HSBC has nearly $15bn invested in, could harm its operations.
Nevertheless, I view these as near-term issues. And I’d expect the firm’s investment to pay dividends in the long run. At its current price, I plan to open a position.
