The UK Government reported 52,009 cases of Covid-19 yesterday. This is pulling the rolling seven-day average higher to levels not seen since the summer. Fortunately, the vaccination rollout means that the correlation with deaths is lower. However, the death toll is now above 100 per day. There are concerns that we may have some restrictions re-imposed over the winter. If this is the case, here are a few FTSE 100 stocks that I’d consider buying.
More time at home
The big unknown is what kind of restrictions would be put back in place, something that depends on how serious the case and death numbers get. One of the most likely actions that could be implemented is a work-from-home request. The impact of this would be people spending a lot more time back at home again.
In this case, I would look to buy shares in a DIY retailer such as Kingfisher. The FTSE 100 company owns brands such as Screwfix and B&Q. Over the past year, the share price is only up 6%. This is largely due to a slump in recent months, partly attributable to people getting back to busy normal life.
The company did well during the pandemic last year due to people deciding to undertake home improvements and renovations. If we see another stay-at-home request (even if it isn’t a full, mandatory lockdown), then I think more people might again dive into DIY. Given its strong online presence and physical locations, Kingfisher should be able to take advantage of this again. But that could be just a temporary boost, of course.
Defensive FTSE 100 stocks
Regardless of the extent of restrictions, I think that they could trigger some form of hoarding of essential items. Supermarkets struggled to cope due to the overwhelming demand last year, but did get a better grip on this as time went on. Therefore, I’d look to invest in a supermarket chain such as Sainsbury’s or Tesco.
With these companies offering essential products, I think demand should remain high over the winter. Such stocks are also defensive in nature. Regardless of the state of the economy, I’m unlikely to see large volatility given the nature of the sector.
One risk to buying these FTSE 100 stocks is that even if high demand does return, supply chain issues could mean the firms can’t take advantage of it. This could hit the reputations of the supermarkets involved.
Benefiting from quietness
A final area I would look at is financial services. More specifically, I would consider buying an insurance company such as Admiral. During the period last year when we didn’t travel or drive as much, the business saw lower claims. This naturally helped to boost profitability. It also enabled the dividend to be increased by 12%, as announced in the 2020 report.
If we see a quarter over the winter of less travel, then I’d imagine the business again could see a boost to profits. This should help the share price, which is up 9.5% over the past year. It should also contribute to the dividend yield, currently sitting at 5%. But again, temporary boosts can be a problem if they make the share price see-saw and I wouldn’t want to buy at the peak.
jonathansmith1 has no position in any share mentioned. The Motley Fool UK has recommended Admiral Group and Tesco. 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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