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Stock prices continue to fall around the world. London Stock Exchange on Monday. Even the FTSE 100 It is heading down and has fallen back below 7,000 points.
Why is the FTSE 100 falling?
The footsie usually rises when the pound sinks. This is due to the large amount of the company’s profit on the index which is denominated in US Dollars and Euros. As sterling falls against these currencies, earnings will get a further boost.
But the indicator is currently slowing down according to the traders’ price increase during the crisis. The Bank of England may intervene in the coming days to help sterling and reduce yields on government bonds. The benchmark interest rate may also stay higher if the measures announced in last week’s mini-budget are implemented.
2 top stocks to buy
Higher prices put additional pressure on economic growth and, in turn, corporate earnings. However, the outlook for profits for many FTSE 100 stocks remains very bright, despite the growing prospect of emergency bank action. Here are the two I’m buying for my portfolio today following fall.
SSE
At current prices, SSE It holds excellent all-round value. It trades at a forward price-to-earnings growth (PEG) ratio of 0.5. And the dividend is sitting at a healthy 5.5%.
The renewable energy producer is not immune to the impact of higher rates. The business has a significant amount of net debt on its books due to the capital intensive nature of its operations.
But this concern is more than reflected in that low PEG ratio. In fact, I think SSE is a good way to ride out this challenging economic period, because energy demand is stable even in dark times. This also gives the company high revenue visibility.
City analysts expect revenue here to rise by 28 per cent in the current financial year (till March 2023). Not many FTSE 100 stocks carry such bright earnings forecasts today.
b&M
Discount retailer B&M European Value Retailer (LSE: BME) slipped on account of the falling pound. Weak sterling results in higher costs. But I believe buying the business could be a smart idea as consumers are feeling the pinch.
According to KPMG, a quarter of Brits now shop at off-price retailers such as B&M. People are desperately trying to stretch their shopping budget as much as possible. And that number could grow rapidly in the coming months as inflation heads north.
Like-for-like sales here fell 2.2% in the quarter to June. But this reflected a sharp contrast to a year ago when the Covid-19 restrictions ended. And the company reported “Improving trends” quarterly. This could signal the beginning of a sharp upward turn.
Today, B&M trades at a price-to-earnings (P/E) ratio of 8.8 times. It also carries a dividend yield of 5%, comfortably beating the FTSE 100 average of 4%.