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BT shares are one of the best opportunities in the FTSE 100

The BT Tower at night
Image: BT Group

I think there are plenty of stocks in the FTSE 100 that I would be happy to buy for my portfolio right now. However, BT (LSE: BT.A) shares stand out to me as being one of the best opportunities in the blue-chip index today. 

The best opportunity 

Only a handful of companies in the FTSE 100 have the same kind of defensive qualities as BT. The organisation is the largest telecoms business in the UK.

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This is impressive for two reasons. 

Firstly, the company reaches virtually every home in the country, although the level of service provided is not universal. 

Secondly, as the world becomes more and more digitised, BT’s market opportunity will only expand. It does not look as though this trend towards digitalisation will ever slow down. 

That being said, these attractive qualities are a bit of a double-edged sword. Growing demand for fast broadband services has attracted a range of competitors to the market. Meanwhile, BT’s large footprint is expensive to maintain. Its competitors usually do not have such a large footprint. They can pick and choose their most profitable markets. As such, they have a competitive advantage not available to the incumbent. 

Still, BT is leveraging its advantages in its favour. After combining with mobile operator EE several years ago, it can now offer a virtually unrivalled communications package for customers. 

The organisation can offer customers fast broadband service, powered by its rapidly growing fibre network, backed up by its 5G EE infrastructure. On top of this, the group’s pay-tv packages offer consumers an extra incentive to sign up. 

Therefore, while BT’s colossal size might have its drawbacks, it also has its benefits. 

The opportunity in BT shares

Despite these advantages, shares in the company currently appear undervalued

The stock is selling at a forward price-to-earnings (P/E) multiple of just eight. It could also offer a prospective dividend yield of 4.7% next year, according to analysts. 

Considering the company’s competitive advantages, I think it deserves a premium valuation, but BT is actually one of the cheapest stocks in FTSE 100. 

This is why I would buy the company for my portfolio today, and I believe it is one of the best investment opportunities in the blue-chip index. 

As well as the advantages outlined above, BT is investing heavily to improve its customer service and the quality of its network. Management is also trying to reduce costs where it can to improve efficiency and streamline operations. 

These initiatives are already starting to yield results. According to current City projections, net profit will hit £1.8bn this year (the highest level since 2019) and £2bn in 2022. 

As the company puts the challenges of the past few years behind it, cash generation should improve. Additional resources will allow the business to increase investment and potentially increase shareholder returns. So overall, I think the outlook for the corporation is incredibly exciting.  

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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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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