2 FTSE 100 stocks I’d buy to build wealth in the long run

After the market sell-off, I’m looking at cheap FTSE 100 stocks to help my portfolio grow over the long run and, if I’m lucky, retire early.

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The FTSE 100 hasn’t had a great month. In fact, it’s down around 5% over the last 30 days after a series of negative announcements triggered a global sell-off.

However, stock market volatility also provides an opportunity to buy. And even before the sell-off, I saw the FTSE 100 as a great place to find dividend-paying value stocks for my portfolio.

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So here are two lead index stocks I’m looking to add to my portfolio to build wealth over the long run. Both are down in recent months, neither are paying anything special in terms of dividends, but I think they will perform well over the next three-to-five years.

Smith & Nephew

Smith & Nephew (LSE:SN) stock is trading near its year-low, but things are looking brighter for this medical device manufacturer. The stock fell 10% in June amid a global sell-off. But I think this represents a good chance to buy.

The firm is still reeling from the impact of Covid-19. The virus brought a halt to elective medical procedures and this still impacts the sector today. In 2020, Smith & Nephew saw pre-tax profits fall to $246m, from $743 in 2019. 

But cancellations are becoming less common and hospitals are increasingly adept at dealing with the virus and its impact. Profits doubled to $586m in 2021, despite record Covid hospitalisations in the UK and elsewhere in Europe.

The latest news has been positive too. In April, Smith & Nephew said Q1 revenue rose 5.9% year-on-year to $1.31bn. This was above analysts’ forecasts of $1.27bn. The firm also said emerging markets revenue was up 14.3%.

With performance not yet back to pre-pandemic levels, Smith & Nephew doesn’t offer the best dividend yield. At today’s price, it’s around 2.5%. But I’d expect to see that rise as operating conditions improve.

Burberry

Burberry (LSE:BRBY) is one of the most iconic brands around. But at the moment, outlook for the luxury fashion house is very dependent on the Chinese economy. With China imposing lockdowns every time authorities come across a cluster of Covid-19 cases, it doesn’t look too positive.

However, I think this has been factored into the share price already. The stock is down 25% over the past year with China wrestling with Covid-19 and other economic pressures, notably the property sector.

But this is also a highly profitable business with impressive margins. Currently, the firm has a price-to-earnings (P/E) ratio of 13.5. By comparison, luxury goods group Kering, which owns dozens of high-end brands, has a P/E ratio of around 20. While less diversified that the French conglomerate, Burberry certainly looks a lot cheaper.

The weakness of the British pound may also offset a near-term fall in sales.

But in the long run, I think Burberry is a brand that will continue to deliver. It has successfully transformed itself into a modern business that attracts customers from all age groups across the globe.

The dividend is a meagre 2.5% right now. But, like Smith & Nephew, I’d expect to see that rise as the operating environment improves.

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James Fox owns shares in Smith & Nephew. The Motley Fool UK has recommended Burberry and Smith & Nephew. 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.

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.

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