FTSE 100 companies proved to be some of the best stocks to buy a few years ago as they were remarkably resilient to the 2022 correction. But since then, their performance has left a lot of investors wanting. Despite impressive comebacks emerging from other indexes, the FTSE 100 has been trending downward since the start of 2024. But is this about to change?
The latest predictions from the Economy Forecast Agency reveal that the UK’s flagship benchmark is on track to reach just over 10,000 points by July 2025! That’s a roughly 30% increase from where it stands today. And it serves as yet another indicator that British shares continue to be severely undervalued in the markets right now.
Obviously, forecasts aren’t always reliable and need to be taken with a pinch of salt. But even if the index fails to reach five-figure territory in just over a year, the upward trajectory proposed by even the group’s most pessimistic outlook still suggests now is the time to consider buying.
With that in mind, here are two cheap-looking bargains that might be some of the best stocks to think about buying today.
A new king in consumer staples?
When it comes to grocery shopping, industry titans like Tesco and Sainsbury’s often get the bulk of investor attention. Yet compared to the performance of B&M European Value Retail (LSE:BME), these businesses pale in comparison.
Management’s tactics to expand its reach during the ongoing cost-of-living crisis have made this value retailer a force to be reckoned with. Operating profit margins are the highest in the industry at 10.8%, with overall sales growth still in the high-single-digit range. And shareholders are about to receive a 20p special dividend on top of the near-70% gain in share price since October 2023.
B&M isn’t the only budget-focused retailer in town. And the previously mentioned sector leaders also aren’t blind to this emerging threat. In fact, Sainsbury’s recently unveiled a new growth strategy, which included further discounting through its Nectar rewards card.
This increased competition may place new pressure on its bonkers margins. Yet with a long track record of defying expectations, that’s a risk I’d consider taking for my portfolio.
Incoming rebound in electronics
RS Group (LSE:RS1) is one of many FTSE 100 companies that’s struggled to gain share price momentum lately. And in this case, investor pessimism may be warranted. After all, as a leading supplier of electronic components, the drastic slowdown in electronics spending has caused sales growth to flatten and profits to tumble.
However, a new round of analyst forecasts for the electronics industry suggests the cyclical downturn may be nearing its end. In other words, headwinds look like they could be turning into tailwinds later this year. And providing the company can capitalise on this shift, growth may quickly return.
The firm’s rising debt balance is a potential concern, especially since it’s been driven by acquisitions that have yet to deliver on performance expectations. However, with cash flow generation remaining robust, the balance sheet looks relatively healthy. And when paired with a price-to-earnings ratio of 16, the shares look underappreciated in my eyes. That’s why I think a potential buying opportunity may have emerged, albeit a slightly risky one.
The post FTSE 100 to surge to 10,000 by 2025! 2 stocks to consider buying before it does appeared first on The Motley Fool UK.
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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value, Rs Group Plc, and Tesco Plc. 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.
