5 Best FTSE 100 Stocks to Buy in July 2021

The FTSE 100 is the index of leading UK-listed companies. It is a market-cap weighted index. The index has constituents from several industries but healthcare stocks account for 10.6% and AstraZeneca is the largest constituent with a 6.02% weightage.

The FTSE hit its 52-week highs recently but has since come down. What’re the best FTSE 100 stocks that you can buy in July 2021 and hold for the long term?

1. Anglo American (AAL)

Anglo American is a diversified mining company. It mainly produces copper, PGM (platinum group metals), diamonds, iron ore, nickel, and met coal. The company also had thermal coal operations. While met coal is used in steel production by blast furnaces, thermal coal goes into electricity generation.

Meanwhile, Anglo American decided to exit their thermal coal assets. It demerged its South Africa thermal coal business and also sold its stake in Cerrejón joint venture to Glencore. Several miners have been trying to exit their fossil fuel business. This helps them become investment-worthy for ESG compliant funds. Several investor groups have been pressurizing mining companies to exit their fossil fuel business.

67% of all retail investor accounts lose money when trading CFDs with this provider.

Why AAL looks like a good FTSE 100 stock to buy

AAL looks like a good FTSE 100 stock to buy after having fallen from its peaks. Looking at the technicals, AAL has found support at the 200-day SMA (simple moving average). The stocks now face resistance near the 100-day and 50-day SMA. The 14-day RSI (relative strength index) is 51.67 which is a neutral indicator.

The stocks have an attractive dividend yield of 2.5% which looks good. AAL trades at an NTM EV-to-EBITDA multiple of just under 3x which looks attractive. The valuation multiples are below historical averages which looks understandable as the multiples for cyclical companies are the lowest near cyclical peaks. However, looking at the current economic environment, the commodity supercycle might continue for some more time.

AAL stocks are a play on copper prices

AAL could be a good way to play the uptrend in copper prices. AAL has a median target price of 3,620.13p which is a premium of 24%. Its highest target price of 4,381.34p implies an upside of almost 51% while the lowest target price of 2,011.26p is a discount of 31% over current prices. Of the 24 analysts polled by the Financial Times, 16 rate AAL as a buy or equivalent while six have a hold rating. Two analysts have a sell rating on AAL stock.

67% of all retail investor accounts lose money when trading CFDs with this provider.

2. Royal Mail (RMG)

Royal Mail stock is up 56% so far in 2021. However, they are now down over 13% from their 52-week highs. The dip could be a good opportunity to buy RMG stock now. Royal Mail has a progressive dividend policy and set the dividend for the fiscal year 2021-2022 at 20p per share. This implies a dividend yield of 3.7% which looks attractive.

Last month, Citigroup assigned the street high target price of £10 on RMG which would mean the stock almost doubles from these levels. It valued the stock at an EV-to-EBITDA of 7x. Currently, RMG trades at an NTM (next-12 months) EV-to-EBITDA of 4.3x.

RMG stock looks a good buy

Parcels accounted for 72% of Royal Mail’s last year revenues. It was the first time in the company’s five-decade history when revenues from parcels exceeded that from letters. In the last fiscal year, GLS revenues increased 27.8% which was over twice what Royal Mail revenues increased. The company expects GLS revenues to increase at a CAGR of 12% between the fiscal year 2019-20 to the fiscal year 2024-2025. Over the period, it expects the business’s operating profits to more than double to €500 million.

The domestic parcel business is doing good

The company sounded positive on the domestic parcel business in its recent trading update. “The domestic parcel market remains strong. The early signs are that domestic parcel volumes appear to be re-basing at a higher level than pre-COVID as consumers continue to shop online,” RMG said in its earnings release.

RMG stock looks like a good proxy way to play the e-commerce industry. While e-commerce stocks trade at elevated valuations, RMG’s valuations look tepid and have a good margin of safety at these prices. The company also has a strong balance sheet and has deleveraged over the last year.

Looking at the technicals, RMG has fallen below the 50-day and 100-day SMA. The stock now faces resistance at the 100-day SMA. If RMG stock can cross above the 100-day SMA, it would be a bullish technical indicator.

67% of all retail investor accounts lose money when trading CFDs with this provider.

3. Barclays (BARC)

Barclays is up 16% so far in 2021 and is outperforming the FTSE 100. The stock has come off its recent highs and the dip looks like a good buying opportunity. Looking at the technicals, BARC stock found strong support at the 200-day SMA and could now head towards the 50-day SMA. The outlook for banking stocks looks strong as the economy continues to improve.

The average target price for Barclays is 221.8p which is a premium of 32.7% over current prices. Of the 12 analysts polled by TipRanks, eight rate BARC as a buy while the remaining four rate them as a hold.

Earlier this week, Goldman Sachs assigned a 270p target price on BARC stock. In July only, UBS Group, Berenberg, and Credit Suisse also set the target price for BARC at 210p, 220p, and 218p. The target prices from all these firms imply potential upside in BARC over the next 12 months.

Barclays stocks look undervalued

While releasing its fiscal first quarter 2021 earnings, Barclays said that its tangible net asset value (TNAV) is 267p per stock. The stock currently trades at 167.6p which is a discount of almost 38% over the TNAV. The stock trade at an NTM (next-12 months) PE multiple of 6.5x which also looks attractive. BARC looks attractively valued both the earnings-based multiples as well as the book value-based multiples. The stock trade below the book value. Generally, for banks, a price to book value multiple below 1 is a sign of undervaluation.

67% of all retail investor accounts lose money when trading CFDs with this provider.

4. Associated British Foods (ABF)

While the FTSE 100 is in the green in 2021, ABF shares are down over 8%. The stock made a 52-week high of 2,528p earlier this year but is now down over 19% from the levels. The stock is getting near the bear market territory. Meanwhile, ABF stock might rebound after the recent underperformance.

The company released its trading update earlier this month and raised the full-year forecast amid strong performance from Primark. Notably, while almost all the major brick and mortar retailers have been strengthening their e-commerce operations, Primark continues to focus only on the physical retail operations.

While the move hurt ABF in 2020 amid the lockdowns, Primark’s sales have now increased to pre-pandemic levels. Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown believes that the company is not expected to look at online retailing anytime soon given the strong performance of Primark after the lockdowns. According to Streeter, “Primark may look increasing like an anachronism, a bricks-and-mortar island fighting off an encroaching online tide, but it has shown that with a strong social media presence it can still entice queues of shoppers through its doors.”

ABF stocks are a buy at these prices

Analysts also have a bullish forecast for ABF stock and its median target price of 2,700p implies an upside of 32% over current prices. Its highest and lowest target prices are 3,045p and 1,800p respectively. Of the 23 analysts polled by Financial Times, 18 rate ABF as a buy while three rate them as a hold. Two analysts have a sell rating.

Looking at the charts, ABF stock has fallen below the 50-day, 100-day, and 200-day SMA. The 14-day RSI of 38.3 signals that it may be headed towards the oversold territory. RSI values below 30 signal oversold positions while values above 70 signal overbought positions.

67% of all retail investor accounts lose money when trading CFDs with this provider.

5. AstraZeneca (AZN)

AstraZeneca stock is up 14% so far in 2021 and is outperforming the FTSE 100. The pharma giant still looks like a good FTSE 100 stock to buy. It is looking strong on the charts and recently crossed above the 50-day SMA. The stock also trades above the 100-day and 200-day SMA.

AZN is a good FTSE 100 stock to buy

Looking at the valuations, AZN stock trade at an NTM PE of 21.65x. The multiples are in line with what we’ve seen over the last three years. The dividend yield for AMZ also looks attractive at 2.45%.

The median target price for AZN is a premium of 13.4% over current prices. Of the 26 analysts covering AZN, 22 rate them as a but while three rate them as a hold. Only one analyst has a sell or equivalent rating on AZN stocks. Earlier this month, Citigroup reiterated its buy rating on AZN.

Overall, AZN looks like a good defensive FTSE 100 stock to buy now.

67% of all retail investor accounts lose money when trading CFDs with this provider.