As the reopening of the UK economy continues, I believe some of the best stocks to buy now are businesses that may benefit from this trend. As such, here are two FTSE 100 companies that I’d buy for my portfolio.
Best stocks to buy now
The first company on my list is the catering group Compass (LSE: CPG). Before the pandemic, this enterprise operated a relatively profitable business.
Contract catering requires little upfront investment as the facilities and equipment are usually owned by the client. This allowed the company to generate robust profit margins and a strong return on investment before the pandemic.
However, over the past 12 months, the company’s revenue has slumped. It reported a 30.4% decline in its last financial year. In addition, operating margins fell from 7% before the pandemic, to 3.4%.
The thing is, the pandemic may have disrupted many of the company’s markets, but people are still eating. This suggests to me that as the economy recovers and reopens, Compass’s revenues should return.
This is the primary reason why I believe Compass is one of the best shares to buy now. I think the group should return to growth over the next 12-24 months as the world gets back to normal.
That said, it’s unlikely to be plain sailing for the FTSE 100 company over the next few months. It’s unclear if office workers will ever return in pre-pandemic numbers. It could also be sometime before large events return. Further, another coronavirus wave may set its recovery back months.
Despite these risks, I’d buy the FTSE 100 company for my portfolio of recovery stocks today.
FTSE 100 growth
The other company I believe is one of the best shares to buy now for a recovery portfolio is InterContinental Hotels (LSE: IHG).
Just like Compass, this company has suffered significantly over the past 12 months. But the owner of hotel brands such as Holiday Inn, Crowne Plaza, and InterContinental should see a return to growth as travel and tourism activity worldwide recovers.
Indeed, the company is already reporting a pick-up in demand. According to its latest trading update, occupancy across its hotels was around 40% at the end of March.
However, management noted there was “clear evidence” that revenues would increase substantially in the months ahead, based on forward-booking trends.
Of course, if there’s another coronavirus wave, these trends will mean nothing. Customers will cancel, and the company will return to stage one. That’s the most considerable risk the business faces right now. It could also struggle due to excess capacity in the hotel sector.
Still, I’d buy InterContinental Hotels for my portfolio of FTSE 100 recovery shares today despite these risks and challenges. As a way to play the economic rebound, overall I think this is one of the best shares to buy now.
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- FTSE 100 shares: the Compass share price slips despite sales improvement
- Would I buy these 2 FTSE 100 reopening stocks now?
Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Compass Group and InterContinental Hotels Group. 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.
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