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2 FTSE 100 shares I’d buy in July

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Chart showing an upwards trend, possibly in the FTSE 100
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When investing in FTSE 100 shares, it pays to be selective. Pick the right Footsie stocks and it’s possible to generate excellent long-term returns. Pick the wrong stocks however, and the results can be disastrous.

Here, I’m going to highlight two high-quality FTSE shares I like as we approach July. Both have delivered strong long-term returns in the past and I believe they’re likely to continue rewarding investors.

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A top FTSE 100 technology stock

One of my top picks in the FTSE 100 right now is London Stock Exchange Group (LSE: LSEG). It’s a leading global financial markets infrastructure and data company. In recent months, LSEG shares have experienced a bit of a pullback and I think this has created a great buying opportunity for long-term investors like myself.

The main reason I’m bullish is that, after the group’s acquisition of Refinitiv (announced in 2019 and completed in January), the company is now a major player in the financial data space. Refinitiv – which has 40,000 customers in 190 countries – provides the world’s top financial institutions with data that enables them to make critical investing and trading decisions with confidence. Last year, global spending on financial market data jumped 6% to hit a record $33bn. In the years ahead, spending on data by financial institutions is likely to rise. This should boost LSEG’s profits.

One risk to the investment case here is the stock’s valuation. Currently, London Stock Exchange sports a forward-looking price-to-earnings (P/E) ratio of around 30. This valuation doesn’t leave much room for error. If future growth is disappointing, the stock could fall.

But I’m comfortable with the valuation. This company has a great track record when it comes to generating shareholder wealth, so I think it warrants a higher valuation.

Upgraded guidance

Another FTSE 100 stock I like as we head towards July is Sage (LSE: SGE). It’s a leading provider of cloud-based accounting solutions to small- and medium-sized businesses.

Sage has struggled a bit in recent years while it’s transitioned from a traditional software company to a software-as-a-service (SaaS) company. The transition has impacted the company’s top and bottom line.

However, performance appears to be improving. In May, the company reported a better-than-expected 4.4% increase in organic recurring revenue along with a 18% increase in Sage Business Cloud revenues. Following this solid performance, the company said it now expects full-year organic recurring revenue growth to be towards the top end of its guidance range of 3-5%.

One risk here is the threat of new rivals. Xero, which is listed on the Australian market, is one I’m particularly concerned about. It has a great product and is capturing market share. Sage’s relatively high valuation (forward-looking P/E of 30) also adds risk to the investment case.

Overall however, I see a lot of appeal in this FTSE 100 stock. I think the company should do well in the years ahead as the global economy picks up speed and small businesses thrive.

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Edward Sheldon owns shares of London Stock Exchange Group, Sage Group and Xero. The Motley Fool UK has recommended Sage Group. 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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