The FTSE 100 is home to some of the largest companies listed on the London Stock Exchange. And with the ongoing economic volatility, size can be a powerful advantage. After all, most of these firms have established revenue streams providing ample cash flow.
Growth prospects may not be as inflated as some of the opportunities within the FTSE 250. However, for investors looking to build a defensive portfolio with less exposure to sudden price fluctuations, these industry leaders could be ideal.
With that in mind, here are two leading shares from the flagship index that I believe can protect wealth while still delivering long-term growth, even with only £100 to invest.
Riding inflation tailwinds
One of the biggest concerns surrounding inflation in 2023 is the impact on consumers. As prices rise, household budgets get tighter. And that leads to reduced spending, making growth for businesses exceptionally difficult.
However, one firm that seems to be benefitting from this trend is B&M European Value Retail (LSE:BME). The group owns and operates a network of discount retail stores across the UK and France selling a blend of staple and discretionary products.
Investing in a retail business isn’t the most exciting prospect within the list of FTSE 100 stocks. But it’s hard to argue with results. The latest trading update reported double-digit growth across the board as consumers seek cheaper shopping avenues.
In the meantime, the company continues to deliver industry-leading operating margins in excess of 10%! For reference, Tesco is barely scrapping past 2%.
There are risks, of course. B&M is not the only value retailer in town, with big names like Aldi and Lidl fiercely competing for consumers’ wallets. Meanwhile, if inflation persists far longer than expected, the current tailwinds may eventually turn into headwinds.
Nevertheless, the discovery of potential savings has likely permanently changed the shopping destination of many households, even after inflation subsides. And with a dividend yield of 4.4%, this FTSE 100 stock looks like an excellent buying opportunity, in my opinion.
Cardboard is the new gold
While it’s often overlooked, corrugated cardboard is becoming an increasingly valuable commodity. The steady rise of e-commerce has sent demand through the roof for packaging of online orders. And even with online shopping being depressed in the current economic environment, DS Smith (LSE:SMDS) is having no trouble achieving growth.
In its latest results, sales grew 14%, reaching £8.2bn, with operating profits jumping a massive 40% to £861m. It seems the company’s dominance within the UK, and Europe has made it the primary supplier of choice for order fulfilment. And with few competitors capable of meeting the scale required by online businesses, management has had no trouble increasing prices to outpace inflationary input costs.
While sales are up, order volumes have started to decline. This isn’t surprising given that slowdown in digital retail. However, should economic conditions worsen and a protracted recession happen, volume decay could amplify. And the company may not be able to offset the negative impact with further price hikes.
But it’s seemingly preparing for such a scenario. New machines are being installed at its facilities across Europe to reduce energy consumption, while older inefficient factories are being closed. And at a P/E ratio of just 8.1, I believe the market is undervaluing this firm’s long-term potential.
