2 top FTSE 100 shares to buy before a new bull market

On my search for FTSE 100 shares to buy before the recovery, I have found two growth options that could boost my returns in the next decade.

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Business development to success and FTSE 100 250 350 growth concept.

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With sky-high inflation and fears of a recession in the UK, stock markets have taken a big hit. But I think global indexes might already be on their way back up. With investor fear high right now, some top FTSE 100 shares are available at bargain prices. And one of my 2022 investing goals is to capitalise on bear markets and invest at the right time. 

I have zeroed in on two shares for my portfolio. These are businesses that I think show growth potential and can generate cash even in tough economic conditions.

Grocer with sky-high dividends

At current levels, I think the Sainsbury (LSE:SBRY) share price is one of the best bargain options in the FTSE 100 right now. AT 209p, it is trading at a price-to-earnings ratio of 7.2 times and a lofty 6.2% yield.

Yes, the company has been in the news this week after last quarter’s sales dipped 4%. But this was in line with board expectations and the profit estimate for the year remains unchanged at between £630m and £690m. While this is lower than the 2021-22 profits of £730m, the company has a few plans up its sleeve. 

Given the rising raw material costs, the board will inject £500m over the next 24 months to keep product cost inflation at the minimum. I think this move will help the grocer gain footing on Tesco and grow its current 15% market share as inflation runs rampant.

Despite small margins, if profit estimates are met, the company expects to generate retail free cash flow of at least £500m in 2022-23, similar to last year’s £503m. I think the board will keep the payouts flat next year given tough economic conditions. But a healthy 5%+ yield looks likely, which I see as a positive.

However, the impact of inflation will hit this sector hard. Large grocers like Sainsbury will lose out to discount retailers, even if current prices are maintained. And this will inevitably eat away at Sainsbury’s revenue. 

But overall, this FTSE 100 firm looks well-set to navigate choppy waters. I am bullish on Sainsbury shares and will consider them for my portfolio in 2022  if signs of a market recovery become stronger. 

Alcohol heavyweight

Diageo (LSE:DGE) is a global alcohol aggregator that owns extremely popular brands like Smirnoff and Johnnie Walker. The FTSE 100 company has adopted an emerging market strategy, focusing on growing regions like India and China.

Down 14.8%, I think the Diageo share price is going through a rare lull given its steady rise over the last five years. And looking at the share price action over the last two decades, the company has been on an incredible upward trajectory. 

And I think this growth could continue given its fast expansion policy. Diageo recently purchased Vivanda, owner of a flavour matching technology. This will allow users to build a flavour profile and choose spirits based on suggestions. I think the company is adopting digital sales and shows a lot of growth potential.

Tough regulations and local competition will grow with expansion. And the company will have to deal with the rising tide of health-conscious youth who are choosing to go alcohol-free in record numbers. 

However, I think the company is well-placed to navigate this given its size, range, and future plans. This FTSE 100 share is not a bargain on paper at 3,525p, but I think the company offers a lot of value and growth. This is why I will wait for a drop in share price before investing.

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.

Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo and Sainsbury (J). 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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