I think quite a few attractive investment opportunities are emerging in the FTSE 100. As equity markets remain unstable, I am looking to take advantage of this volatility. And with that in mind, here are my top blue-chip shares to buy right now with £3k.
FTSE 100 global champion
I am looking to buy stocks for my portfolio that have a global competitive advantage. This is an edge that competitors around the world may not be able to replicate.
There are many examples of competitive advantages. Size and scale are two of the most important. A unique product or service could be another sign of a strong competitive advantage.
Building materials group CRH (LSE: CRH) exhibits several of these qualities. Manufacturing and distributing building products is one of those industries which investors often overlook. However, it fulfils an essential role in the global economy. Starting up a quarry or facility to convert raw materials into building products is not easy. It requires a lot of money and experience to develop these facilities.
It also requires permission from local authorities, which can be hard to maintain. Local authorities need to trust the company is responsible enough to develop a facility that will not harm the environment or the local population.
An edge in the market
This is where CRH has an edge. The FTSE 100 company is one of the largest building materials companies in the world. It has the financial resources and the connections to develop these facilities effectively without getting bogged down in excessive regulation or having to ask shareholders for additional cash.
The company’s size means local authorities can rest safe in the knowledge that there will be room to achieve some sort of compensation if something goes wrong.
Still, while the corporation does have an edge in the market, it is not immune to the risks involved. One of the most significant risks the company could have to deal with is environmental concerns. The construction industry is one of the biggest polluters in the world. Dealing with the costs of this pollution could significantly impact the organisation’s profit and profit margins.
Nevertheless, building activity around the world is booming, and the company is capitalising on this growth. According to its latest results release, sales increased 12% in 2021 and earnings before interest, tax, depreciation and amortisation (EBITDA) increased 16%.
To help complement growth, the company is looking for additional acquisitions. Last year, it invested $1.5bn on 20 bolt-on acquisitions to help expand its presence in additional markets. The group is planning further acquisitions and capital spending to increase its footprint in certain markets.
A key area of growth for the company is America. Here, management is excited by the recently announced $1.2bn infrastructure package, which could have a significant impact on the demand for construction materials across the region.
The number of housing starts has also recently hit a multi-year high, further reinforcing the company’s opinion that the demand for building materials will increase substantially across the US in 2022 and beyond.
Based on these qualities and the outlook for the company, I think this is one of the best shares to buy right now. I would not hesitate to add the FTSE 100 stock to my portfolio with an investment of £3,000.
Alongside CRH, I would also buy its blue-chip peer Ashtead (LSE: AHT). I think this is a really interesting company. It owns capital equipment, which it rents out to organisations like builders and other industrial companies.
This business model is incredibly profitable. It requires a lot of capital investment upfront, but once an enterprise has acquired the equipment, it can rent it out repeatedly and earn a high return on its initial investment.
Indeed, the company has reported a return on invested capital in excess of 50% in the past. This generates plenty of additional funding for the business to reinvest back into new growth initiatives and buy smaller peers.
During the six months to the end of October 2021, the company invested $1.2bn in the business and spent a further $428m on acquisitions. It is also benefiting from the construction industry boom taking place in multiple markets around the world.
While the company’s biggest market is North America, it also has a strong presence in Europe. Rental revenue increased 18% year-on-year in the six months to the end of October. Operating profit increased 22% and adjusted earnings rose 29%.
With profits surging, I think the group could report faster growth in the years ahead as it reinvests its capital back into growth initiatives and targets new markets.
That said, this company is very sensitive to the economic environment. One of the biggest challenges it will have to overcome is the uncertain economic outlook.
If spending falls in the construction industry, demand for its products and services could also decline. This would also certainly have a significant impact on profitability as a company is not making any money if its equipment is sitting its yards unused.
Even after taking this potential challenge into account, I think the outlook for the business is incredibly exciting. As such, I would not hesitate to buy the stock for my portfolio today.
As the FTSE 100 company capitalises on the improving economic backdrop, I think it will be able to grow and invest more, further accelerating its growth rate over the next five to 10 years.
Even though the current geopolitical and economic environment could prove to be a significant headwind for the business, as a buy-and-hold investment for the next decade, I think this is one of the best shares to buy now with £3k.