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The clock is ticking. You only have 13 more days to seek shelter from the taxman for up to £20,000. It’s a simple equation: use it or lose it!
I may not have a lot to spend, but I want my money to work as hard as possible for me. So, for now, I’m forgetting the cash isa for one simple reason. As inflation spreads through the economy, the lowering of that type of account’s interest rate makes it a surefire way that, over time, the value of my nest egg will erode.
As the ISA deadline approaches, these are my top stock picks; Whom I have the greatest confidence to outperform the market in the years to come. I wouldn’t hesitate to buy any of these FTSE 100 blue chip companies today
Top Pick 1: BP
It ain’t no genius to tell you that rising oil and gas prices have changed bp (LSE: BP) in a cash-generating machine. In its full-year results, it reported revenue of $164bn, which translated into a staggering $12.8bn profit.
Although its dividend yield of 4.3% is nothing to shout home about, the company has set aside more than 60% of free cash flow to buy back shares. It estimates the buyback will be in the region of $4bn a year, with oil at $60. Today it is trading at almost double that.
Warren Buffett is a big fan of share buybacks. It has helped turbocharge their returns Apple, Berkshire Hathaway‘stop holding. I believe it can do the same thing for BP.
Of course, BP is one stock that the market doesn’t like. Its share price is reduced by two factors. First, the long-term decline in hydrocarbon use. Second, its future cash flows are highly uncertain as it transitions into an ‘integrated energy company’.
However, I believe the macroenvironment is highly favorable for BP. The idea that inflation is fleeting is well and truly dead. The striking parallels between the oil crisis of today and the early 1970s are disturbing. As a result, I expect its share price to perform well in the coming years.
Top Pick 2: Glencore
Glencore (LSE: GLEN) has been one of the best performers on the FTSE 100, with its stock price up nearly 400% since the pandemic.
Glencore’s stock price is now trading at levels seen a decade ago, behind several years or record highs such as copper, cobalt, zinc, nickel and aluminum. It’s no surprise that analysts have rushed to upgrade their target price for this major commodity producer and trader.
For those of you chasing income, its combined dividend and share buyback policy means that its current yield is a very healthy 4.7%.
Of course, with such a staggering stock price appreciation, so could we be at or near the top? With a long-term investment mindset, I don’t believe so.
As with BP, the investment thesis for Glencore remains intact. On top of rising inflation, population growth, rising living standards in developing economies, and the push to transition to a green economy are all tailwinds for the company. Couple that with a chronically low investment in exploration across vast areas of the natural resource sector, and it’s all content to see its share price rise throughout this decade.
Only 13 days before the post ISA deadline, my top 2 FTSE 100 conviction stocks first appeared on The Motley Fool UK.
Andrew Mackie is the owner of BP and Glencore. The Motley Fool UK recommends Apple. The views expressed on the companies mentioned in this article are those of the author and may therefore differ from official recommendations made by us in our membership services such as Share Advisory, Hidden Winners and Pro. Here at The Motley Fool, we believe that contemplating different types of insights makes us better investors.
The Motley Fool UK 2022