Do you have £3,000 you would like to invest in the stock market? Knowing which stocks to buy can be difficult, particularly during this unpredictable period of stock market volatility. In times like these, I look for companies with a proven track record and the staying power to ensure they will go the distance. Two such FTSE 100 constituents that never fail to attract my interest are BP (LSE:LON:BP) and BAE Systems (LON:BAES) (LSE:BA.)
Both have been around for decades and I see each of them surviving far into the future.
Why BP is a long-term portfolio stock The BP share price has suffered this year due to the suppressed price of oil. The combination of the coronavirus pandemic that put the brakes on oil demand and a glut caused by overproduction pushed the oil price down. Oil companies were relying on the price of oil to be above $50 per barrel, but with it hovering around the $40 mark, growth and profitability have reached a stalemate. BP has responded by increasing its debt, divesting divisions no longer deemed feasible for continued expansion and exerting its efforts on reinventing itself as a low-carbon energy giant. Although this has caused share price fluctuations in recent weeks, I think its strategy will pay off in the long term.
Investing in renewable energy is a core aim of governments around the world and BP has the experience and funding to excel in this area. Oil is still very much integrated into our society, so although it is gradually being phased out, it will be some time before it can be completely eradicated. I think this means the oil price will recover and ultimately explode once the pandemic subsides and normality resumes. This could take a couple of years, but I think this FTSE 100 constituent is an excellent stock to buy for the future. It also offers a very nice dividend yield above 10%. This is not likely to be sustainable long term, particularly if the oil price stays low, but even if it reduces by half, a 5% dividend yield is a decent return.
Defensive FTSE 100 constituent The BAE share price has also withstood a frustrating few months. Despite winning new contracts and coping with the fallout from the pandemic, it has fallen over 15% year-to-date. First-half profit is expected to fall by around 15%, but demand remains high and it anticipates increased trading in the second half. Although the company has put its dividend payment on hold, analysts now think the likelihood BAE will maintain it is high. It should confirm this at the end of July and if so, will have a yield of around 4.8%.
BAE Systems is the largest defence contractor in the UK and one of the largest defence companies globally. With the world in chaos, many governments are supportive of defence budgets and looking at ways to protect citizens. Earlier this week, Australia announced plans to increase its military spend by $270bn to prepare for “a poorer, more dangerous and more disorderly” world, as well as China’s continued rise as a superpower. If the US reduces its defence budget, then that would be unwelcome news for BAE shares, but I think this scenario is highly unlikely.
If I decided to invest £3,000 in a Stocks and Shares ISA, these FTSE 100 constituents would be my first choices.
The post Have £3,000? I’d buy these 2 FTSE 100 constituents right now and hold these stocks forever! appeared first on The Motley Fool UK.
Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020
First published on The Motley Fool
