When I am looking for FTSE 100 shares to buy for growth, I focus on companies that are benefiting from significant industry tailwinds.
These could be anything from technological change to shifting consumer sentiment. Or, in the case of Berkeley Group (LSE: BKG), an undersupplied UK housing market.
Shares to buy for growth
The country needs to build more houses, and Berkeley is rising to the challenge. It wants to increase its housing output by 50% for the 2024/25 financial year.
To this end, the group has some 7,000 plots on sites it is currently advancing that it anticipates will come into land holdings by the end of the next financial year. On top of these existing plots, these new developments take the company’s overall estimated future gross profit from land holdings to £7.5bn.
As well as jacking up its output, the company is also increasing returns to investors. It is looking to return £2.52 per share annually until September 2025. It has also been repurchasing shares and will continue to do so until September 2022.
Based on the company’s growth plans and cash return potential, I would be more than happy to buy this FTSE 100 homebuilder from my portfolio today.
Challenges it could face as we advance include rising costs and planning constraints. These could limit the group’s ability to hit its output targets and reduce profitability on homes constructed if costs rise significantly. The supply chain crisis could also delay the development of new properties.
FTSE 100 retailer
Over the past two years, Ocado (LSE: OCDO) has really come into its own. Demand for the company’s services has exploded as consumers are shopping online more and more.
According to its latest trading update, customer acquisitions hit a record of 64,000 in the 13 weeks to the end of August. Orders per week increased 22% although, due to tough comparisons with last year, overall revenue declined marginally by 1.8%.
It has also benefited from its agreement with Marks & Spencer. Demand for the retailer’s food through Ocado’s platform has exceeded expectations, providing a windfall for M&S and its joint venture partner.
One of the biggest challenges the company has had to deal with in recent months is a fire at its warehouse. This took a significant chunk out of revenue, as the group could not process 300,000 customer orders. This kind of infrastructure disruption is the most significant risk to Ocado’s growth. It is something I will be keeping a close eye on going forward.
Even after considering this factor, I am incredibly encouraged by the group’s recent growth and forward growth potential.
Management has been working flat out to increase capacity to meet the rising demand for Ocado’s services. These expansion efforts are expected to deliver strong revenue growth in 2022. On that basis, I would buy the company for my portfolio of FTSE 100 recovery stocks.
