How I’d invest £1,000 in the FTSE 100 to build long-term wealth

Building wealth comes down to buying shares that will be worth more in future than they are today. Which FTSE 100 stocks fit the bill?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

There are three FTSE 100 stocks I’d buy to build wealth over time. The first is Experian (LSE:EXPN), the second is Halma (LSE:HLMA), and the third is Rightmove (LSE:RMV). 

Building wealth in the stock market comes down to buying shares that are going to be worth more in the future than they are today. And that involves the underlying business making more money.

There are three main ways a business can do this. One is by increasing its revenues, another is by improving its margins, and the third is by reducing its share count.

With a spare £1,000, I’d invest £300 into Experian, £300 into Halma, and £400 into Rightmove. I expect all three to be worth more 10 years from now than they are today.

Experian

Experian has grown its earnings per share (EPS) by 12% per year on average over the last decade. Even if that slows to 10%, I think the company will be worth more in 2033 than its price today.

If this happens, the company’s EPS will be £2.49 in 2033. And at today’s prices, that would imply a price-to-earnings (P/E) ratio of 10.

I don’t think Experian’s shares are likely to trade at that P/E ratio, so I’m expecting the stock to be higher 10 years from now. The only question for me is how much.

A falling property market is a headwind for the business (that’s probably why the stock is down). But I think this is a short-term risk for a company that has the potential to do well over the next decade.

Halma

Halma’s growth has been the result of higher revenues. Since 2013, the company’s top line has grown by 146%.

The company is aiming for 10% revenue growth going forward. That would bring revenues to £4bn, implying a price-to-sales (P/S) multiple of around two at today’s levels.

Unless the stock is going to trade at two times sales (which I think is unlikely), 10% revenue growth over the next few years will mean the stock trades higher. This seems highly probable to me.

A recent UBS note suggested that there’s a risk Halma might struggle to make its growth targets. But even UBS’s target price for the stock is 15% higher than its current level.

Rightmove

If I could only buy one FTSE 100 stock today to hold for 10 years, I’d choose Rightmove. At today’s prices, I think it’s great value.

Growth at Rightmove have been boosted by a share buyback programme. Conseuently, 9% annual revenue growth has resulted in 12.5% EPS growth.

The company’s low capital requirements mean I expect the growth story to continue. So even if revenue growth slows, I think the stock will be worth a lot more 10 years from now.

With plenty of UK estate agencies creating their own online platforms, the stock isn’t risk-free. But I think its size and scale should allow the company to grow significantly into the future.

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 assessed. Consider taking independent financial advice.

Stephen Wright has positions in Rightmove Plc. The Motley Fool UK has recommended Experian Plc, Halma Plc, and Rightmove Plc. 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.

More on Investing Articles

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

Could the FTSE 100 be set to soar in 2024?

The FTSE 100 keeps threatening to go off on a growth spree. And weak sentiment keeps holding it back. But…

Read more »

Investing Articles

Is this FTSE 100 stalwart the perfect buy for my Stocks and Shares ISA?

As Shell considers leaving London for a New York listing. Stephen Wright wonders whether there’s an undervalued opportunity for his…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

3 things I’d do now to start buying shares

Christopher Ruane explains three steps he'd take to start buying shares for the very first time, if he'd never invested…

Read more »

Investing Articles

Investing £300 a month in FTSE shares could bag me £1,046 monthly passive income

Sumayya Mansoor explains how she’s looking to create an additional income stream through dividend-paying FTSE stocks to build wealth.

Read more »

Investing Articles

£10K to invest? Here’s how I’d turn that into £4,404 annual passive income

This Fool explains how using a £10K lump sum can turn into a passive income stream worth thousands for her…

Read more »

Investing Articles

1 magnificent FTSE 100 stock investors should consider buying

This Fool explains why this FTSE 100 stock is one for investors to seriously consider with its amazing brand power…

Read more »

Rainbow foil balloon of the number two on pink background
Investing For Beginners

2 under-the-radar FTSE 100 stocks under £2

Jon Smith identifies two FTSE 100 stocks that he believes are getting a lack of attention from some investors but…

Read more »

Investing Articles

£8,000 in savings? I’d use it as a start to aim for £30k a year in passive income

Here's how regular investing in the UK stock market, over the long term, could help us build up some nice…

Read more »