Top FTSE 100 shares to watch in June

The FTSE 100 tumbled on Tuesday after investors begin to question if the recent rebound was premature as the total cost of Covid-19 hits £62 billion. With that in mind, IG looks at stocks capable providing further gains in June.

The FTSE 100 tumbled on Tuesday after investors begin to question if the recent rebound was premature as the total cost of Covid-19 hit £62 billion and retailers remain anxious about whether demand will return when non-essential shops reopen on 15 June.

The FTSE 100 is down more than 100 points to 6351 at the time of publication.

With the blue-chip index falling below trendline support on Tuesday and looking likely to lose some of the gains it secured last week, IG looks at stocks that have outperformed the broader market and are worth watching throughout June.

Avast

After the FTSE 100 reshuffle, Czech-based software company Avast has joined the blue-chip index, with a market cap of £4.7 billion.

Avast is one of the world’s largest cybersecurity firms, with more than 435 million users that rely on the company’s malware, anti-virus, firewall and anti-hacking tool kits to keep their data safe.

Earlier this year, the company unveiled its first quarter results, which showed that the business had actually benefitted from government-imposed lockdowns that have forced people to work from home – allowing the business to leave its full-year guidance unchanged.

Despite the stock tumbling 38% at the height of the Covid-19 crisis, the company’s share price has climbed 68% since hitting a low of 270p per share and could continue to trade higher in 2020 due its strong growth outlook.

Avast is trading at 463p per share at the time of publication.

Ocado

Ocado has seen rapid share price growth this year, which was expected by many investors considering that government-imposed lockdowns forced millions of people to buy online in a bid to stay safe amid the Covid-19 outbreak.

However, nobody could have predicted that the online grocer would see its stock climb 60% year-to-date, with its shares likely to continue to trade higher with life unlikely to return to normal in the near-term.

Fraser McKevitt, head of retail and consumer insight at Kantar, said: ‘The most recent three-month period now includes both the pre-lockdown rush to the shops in March, and eight weeks of stay-at-home advice from government - a combination which has resulted in the fastest growth in take-home grocery sales for over 25 years.’

Over this 12-week period Ocado was the biggest winner in the grocery sector with sales climbing 32.5% as shopping shifted to online.

‘While the gains made by online shopping are unlikely to be sustained at these levels, the crisis has certainly accelerated the move towards online,’ McKevitt added.

‘The grocers have attracted a new group of customers, in particular older demographics, and we expect some of them may continue using online services and enjoying the convenience that home delivery provides.’

Ocado is trading at 3% higher on Tuesday at £20.52 per share at the time of publication.

British American Tobacco

British American Tobacco (BAT) saw its share price slide more than 3% on Tuesday after the company trimmed its earnings guidance for 2020.

In its latest trading update, BAT said it is now forecasting mid-single-digit earnings per share (EPS) growth based on 1% - 3% revenue growth, down slightly from its previous guidance of 3%- 5% revenue growth.

However, the stock has remained pretty resilient considering the myriad of macroeconomic headwinds it and the wider industry is facing, evident by it retaining its dividend pay-out ratio of 65% of adjusted diluted EPS and growth in sterling terms.

Shares in the maker of Kent and Kool cigarettes are down 8% year-to-date, outperforming the broader market, with the FTSE 100 down 16% over the same period.

But the company’s share price rally is far from over, according to analysts at Jefferies, with the US-based investment bank reiterating its ‘buy’ rating and issuing a target price of £48 per share in June – implying a potential upside for the stock of 58%.

BAT is trading at £30.26 per share at time of publication.

How much does it cost to buy UK shares with IG?

There are three ways to ‘buy’ UK shares with IG: spread betting, trading CFDs or buying physical shares. The cost will depend on which method you choose. The table below illustrates how the costs to get exposure to £10,000 of Lloyds stock, which is equivalent to 16,000 shares (quoted at 62.5p a share).

Remember, spread bets and CFDs are derivatives, which come with higher risk and reward than investing.

Cost to get exposure to Lloyds stock

Spread betting CFD trading Share dealing
Action Buy £160 per point Buy 16,000 share CFDs Buy 16,000 shares
Capital required to open £2000 £2000 £10,000
Total fees £20.88 £20.88 £16

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Note: Amounts do not include overnight funding charges and taxes. Spread bets are not subject to tax. CFDs are free from stamp duty, but subject to capital gains tax. Share dealing is subject to both stamp duty and capital gains tax.

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