My favourite FTSE 100 shares to buy

Rupert Hargreaves explains why these two FTSE 100 companies qualify as some of his best shares to buy in the current market environment.

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Scene depicting the City of London, home of the FTSE 100

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My favourite FTSE 100 shares to buy today are Admiral (LSE: ADM) and M&G (LSE: MNG). I already own Admiral and would buy M&G for my portfolio. 

There are a couple of reasons why I think these blue-chip stocks look more attractive than any other businesses in the index. 

Blue-chip shares to buy

Starting with M&G, this asset management group, which was once part of the insurance giant Prudential, looks to me to be incredibly undervalued. The stock is currently changing hands at a forward price-to-earnings (P/E) ratio of 4.5. 

On top of its low valuation, shares in the group also offer a market-beating dividend yield of 9.2% at the time of writing. 

So, why is the business so cheap? I think there are two reasons. First of all, it would appear that the market does not trust the enterprise. It has only been an independent business since June 2019, and it has not had time to establish itself as a separate entity.

At the same time, it would appear as if investors are worried about the group’s growth potential. Asset and wealth management is an incredibly competitive industry.

With £370bn of assets under management, M&G is hardly the smallest player in the market, but it is tiny compared to Legal & General and Schroders. The former manages over £1trn of assets while the latter manages more than £700bn

Overcoming these issues is going to be the biggest challenge the group will face as we advance. 

To help increase diversification and boost growth, M&G has been buying smaller wealth managers. It has also been trying to improve its reputation in the City. 

While the company does face some significant risks, if these efforts pay off, I think the FTSE 100 stock could rise in value substantially. That is why it is on my list of the best shares to buy today. 

FTSE 100 growth

Admiral is a different investment altogether. The company is highly regarded by the market as its valuation shows. The stock is selling at a forward P/E of 20. 

Still, I think the company is worth a premium multiple. It is one of the country’s largest car insurers and is spending heavily to increase its exposure in other sectors such as lending and home insurance. The group also has a growing presence in several European markets as well as the US. I think these will be key growth drivers in the years ahead. 

Last year management decided to return money to customers who were no longer using their cars in the pandemic. The cost of this has been more than offset by the increase in positive customer sentiment towards the business. The number of insured customers jumped in the first half of 2021 as a result of this initiative. I think the group will be benefiting from this decision for years to come. 

Despite the company’s attractive qualities, risks such as competition and additional regulations may hold back growth in the future. Indeed, the car insurance market is incredibly competitive. While the FTSE 100 corporation has been able to stay ahead of the competition so far, there is no guarantee this will continue.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Rupert Hargreaves owns shares of Admiral Group. The Motley Fool UK has recommended Admiral Group, Prudential, and Schroders (Non-Voting). 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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