The FTSE 100 index has been in a strong bearish trend in 2022 as concerns about the UK economy continue. It was trading at £6,933 on Monday, meaning that it has crashed by more than 6% in 2022. As a result, it has outperformed its American and European indices like the Dow Jones, FTSE 250, and the German DAX. Here are the best FTSE 100 shares to buy as the pound sterling plunged.
BAE Systems (LON: BA.) is the biggest defence contractor in Europe and one of the largest firms in the world. The firm manufactures some of the most lethal weapons used by top countries like the UK and the US.
BAE share price has jumped by more than 54% in 2022 as investors anticipate more demand due to the crisis in Ukraine. Most defence contractors have seen robust demand as countries boost their defence spending.
BAE is a good stock to buy as the pound sterling collapses for two main reasons. First, BAE makes most of its money in the US, where it has huge manufacturing plants. As such, the strong US dollar has made it relatively cheaper to import key metals used in its manufacturing. At the same time, the strong US dollar means that the firm has positive forex tailwinds.
Second, the BAE share price is rising as investors anticipate more demand for howitzer missile systems after its success in Ukraine. Therefore, the company is considering restarting its production to deal with the rising demand. It discontinued the product a few years ago. According to the WSJ, the restart can take between 30 and 36 months.
Shell (LON: SHEL) share price has been in a strong bullish trend in 2022. It rose by more than 40%, helped by the soaring oil and gas prices. It is the third-best performer in the FTSE 100 index after BAE Systems and Homeserve.
Shell, formerly known as Royal Dutch Shell, shares rallied last week after the decision by OPEC+ to slash production in a bid to boost prices, as we wrote in this report. The 2 million barrels cut were the biggest since 2020. As such, oil prices have risen sharply in the past few days.
However, Shell slashed its forward guidance. It expects its integrated gas production to be between 890 and 940 thousand barrels of oil equivalent per day. The company expects that its oil production will be between 1.75 million and 1.85 million barrels. Still, Shell is expected to deliver record profitability this year.
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