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Are you looking for the best? FTSE100 stocks to buy this month? Here are two of the highest quality blue-chips on my watchlist.
BAE Systems
It’s not just U.S. technology stocks that have fallen sharply in recent weeks. Defense stocks have also fallen as investors have moved into protected profits following an earlier rally in stock prices.
As I write this, BAE Systems‘ (LSE:BA.) the share price is down 7% in the past month. I think this pullback presents an attractive opportunity for me to enter a position.
The FTSE 100 stock is one of the world’s biggest defence contractors. It supplies military equipment around the world and is a key supplier to the US and UK militaries. And it is enjoying record levels of orders as global armaments grow at their fastest rate since the Cold War.
Unfortunately, the scale of global tensions means that demand for weapons could see an even greater raise. Sir Roland Walker, the head of the British military, has said that it must triple its combat strength by 2030 to counter perceived threats from China, Russia and Iran. Expect weapons budgets to continue to rise.
City analysts expect BAE Systems to report powerful profit growth for at least the next few years. The projected 7% raise in net profits this year is preceded by forecasted increases of 12% and 10% for 2025 and 2026, respectively.
With a price-to-earnings (P/E) ratio of 18.3, BAE Systems shares still trade at a premium to the broader FTSE 100. However, despite the risk of unstable contract lead times and project development issues, I think the defence giant deserves this premium.
Berkeley Group
Developers like Berkeley Group (LSE:BKG) remain under pressure from higher than usual interest rates. While this remains a persistent threat to housing demand, weakening inflation means the Bank of England could cut interest rates multiple times over the next year.
On an encouraging note, mortgage interest rates are falling again, which some see as a sign that things are improving for homebuyers.
Last week, Nationwide became the first lender to offer a rate below 4% for the first time in years. Industry experts believe this could spark a modern race among lenders that could set the market on fire.
It’s not the only good news cities like Berkeley have received recently. After the general election, Labour confirmed its plan to build 1.5 million modern homes by 2029. The bonfire of planning regulations to make this a reality could boost builders’ profits for years to come.
Of course, Berkeley isn’t out of the woods yet. City analysts see annual profits falling 7% and 6% over the next two fiscal years before rebounding.
However, with a P/E ratio of 14.2, Berkeley is cheaper than its FTSE 100 rivals, which could be a better way for value investors like me to take advantage of the property market recovery.