You’ll never guess where these FTSE 100 stock ideas came from

Checking out — and checking in to two FTSE 100 stock ideas.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Peter Lynch, legendary manager of the Magellan fund in the 1970s and 80s, tells the story of one of his best investments. It was very simple.
 
His wife tried a new pantyhose brand called L’eggs and thought it was great. Lynch did some research and bought shares in the brand owner. L’eggs radically changed the hosiery marketplace and he made a 10-fold return on his investment.
 
He reckons that if ordinary folk like you and I keep one eye out for investment ideas as we go about our daily lives, we’ll see potential winners all around us.
 
Now, with my eyesight, I really need both eyes just to avoid walking into plate-glass doors and so on. But over the years I’ve managed to develop what I think of as a little Peter Lynch, sitting in my peripheral vision, alerting me to possible investment opportunities.

Silky Hotel

Due to a family connection, I recently found myself obliged to watch a BBC pilot sitcom called ‘Silky Hotel’.
 
The hotel is in trouble. The attractions of the “billowing gauze of The Meatloaf Suite,” the “twinkling lights on the Kem & Amber terrace,” and the “original tent peg from Brokeback Mountain” are no longer pulling in the punters like they used to.
 
In a last roll of the dice to avoid insolvency, the proprietors attempt to get Silky’s on to a reality TV show that’s looking for the world’s most romantic hotel.
 
Of course, for comedy to work, there must be some truth at its heart. And, as the final credits rolled, the little Peter Lynch on my shoulder whispered two FTSE 100 names into my ear.

How to do hotels

Whitbread‘s Premier Inn hotels may not be the world’s most romantic, but they’re loved for the consistency of the experience they offer and their reliability in meeting or exceeding guests’ expectations.
 
Sure, there are some great independent hotels around. But there are also plenty of real-life hell holes, like Silky’s. Understandably, there’s been a long trend of guest migration from independent to branded hotels, especially in the budget segment of the market.
 
Premier Inn has become the UK’s biggest chain, with over 800 hotels and 79,000 rooms. But the market’s still pretty fragmented (independents have a 48% share), and Whitbread believes there’s scope to grow Premier Inn to at least 110,000 rooms.
 
What’s more, the company has recently entered Germany, where the market’s not only bigger, but also more fragmented (independents have a 72% share). There’s execution risk, but replicating Premier Inn’s UK success in Germany represents a huge growth opportunity for Whitbread.

Reality check

I’m a sometimes user — and fan — of Premier Inn, but I can’t say the same about reality TV. Nevertheless, I can see the UK public has an insatiable appetite for it, and that hit shows, like ITV‘s I’m a Celebrity and Love Island, develop into valuable international franchises.
 
Of course, the company does a lot more than reality TV. And more than you might think. For example, it produces the hit drama series Line of Duty for the BBC.
 
Its streaming platforms are also growing strongly, while beneath the bonnet there are other growth drivers in the shape of its advanced advertising platform Planet V and an increasing portfolio of investments in innovative early-stage businesses within the ever-evolving entertainment landscape.
 
Certainly there are challenges for ITV in responding to the changes in that landscape, as well as in attracting and retaining top creative talent. Nevertheless, the company appears strongly positioned to continue producing hugely popular content and exporting the best of British around the world.
 
Like a lot of so-called recovery stocks, ITV and Whitbread have gone off the boil since making post-market-crash highs earlier this year. Both are currently trading at significant discounts to those highs. For me, this makes them even more interesting.

Last L’eggs

I’ve only sketched the growth potential of the two businesses, some of the risks and the possibility of value in the shares. You’d want to know a lot more before deciding whether there’s investment merit in either or both of them.
 
So, if Whitbread and ITV aren’t my Foolish tips for the week, what is? Simply this: incubate your own little Peter Lynch as you go about your daily life, and you’ll never be short of investment ideas that bear further investigation.
 
Who knows, with the right idea, research and analysis, you might just hit upon as profitable an investment as L’eggs was for Lynch.

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 assessed. Consider taking independent financial advice.

Graham doesn't own any shares mentioned in this article. The Motley Fool UK has recommended ITV. 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.

More on Investing Articles

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

6.9% dividend yield! 2 cheap stocks to consider for a £1,380 passive income

Looking for a market-beating passive income? These FTSE 100 and FTSE 250 dividend stocks could provide a healthy second income…

Read more »

Mature black couple enjoying shopping together in UK high street
Investing Articles

Potentially 34% undervalued, should I be watching the boohoo share price?

The boohoo share price has seen a rocky few years, but with signs that the economy is improving, could this…

Read more »

Investing Articles

Is the Amazon share price primed for a drop?

The Amazon share price has been on a tear for the last year, but can this trend continue? Gordon Best…

Read more »

Photo of a man going through financial problems
Investing Articles

Down 15% in a week! What’s gone wrong with the National Grid share price?

The National Grid share price isn't supposed to crash but now it has. Harvey Jones is wondering whether to take…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

Taylor Wimpey just paid me £158.78. I’m aiming to turn that into a £100k yearly second income

Harvey Jones says small, regular dividend payments can turn a few pounds into a mighty second income, if he gives…

Read more »

A pastel colored growing graph with rising rocket.
Value Shares

These FTSE 250 shares are tipped to rise 14% to 18% in the next year!

Looking for the best FTSE 250 momentum shares to buy? Here are two that City analysts expect to soar in…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

Lloyds’ share price is up 20% in 3 months! How high can it go?

Lloyds’ share price has ripped higher recently. Here, Edward Sheldon provides his view on the level it could potentially climb…

Read more »

Investing Articles

Why the Rolls-Royce share price could continue to outperform

The Rolls-Royce share price keeps moving forward, but this Fool thinks it's still behind where it ought to be after…

Read more »