I believe a good mix of FTSE 100 shares can help make an impressive pool of stocks to build long-term wealth.
Two picks that investors should be seriously considering are Associated British Foods (LSE: ABF) and Hikma Pharmaceuticals (LSE: HIK).
Here’s why!
Food and value clothing
Associated British Foods – best known as ABF – is the manufacturer and owner of many popular food brands with a great historical track record and wide reach. In addition to this, it is also the owner of the value clothing powerhouse Primark. This segment of the business is where the investment case excites me the most.
Over a 12-month period, the shares are up 20% from 1,920p at this time last year, to current levels of 2,323p.
The business has excellent defensive abilities, stemming from its long-established food operations, as well as exciting growth prospects. Growth comes from its Primark operations. The business has exploded in recent years as the spotlight and popularity on value clothing has skyrocketed. ABF continues to expand its Primark store presence across the globe. In turn, this could propel performance and returns to new heights in the future.
The biggest risk for me is the pressure of inflation on costs for the business. These rising costs could take a bite out of margins, which underpin returns. Plus, some of its food products are considered more premium. Due to the current cost-of-living crisis, consumers may turn to cheaper non-branded essentials.
From a fundamentals view, a dividend yield of 2.5% is attractive. Plus, the shares trading on a price-to-earnings ratio of 17, which isn’t the cheapest, nor overvalued, if you ask me. However, sometimes, paying a premium for a quality business is a must, in my view.
Pharmaceuticals
Hikma also possesses defensive attributes, in my opinion. This is because medicines and treatments are essential to day-to-day life, similar to food.
The shares are up 13% over a 12-month period from 1,658p at this time last year, to current levels of 1,890p.
What I like about Hikma’s modus operandi is its set up. It operates in three main segments. These are injectable, generic, and branded pharmaceuticals. This range of operations protects it against a drop off in one area, as another area could offset any weakness.
Plus, the business has a good track record of investor rewards. It has hiked its annual dividend for 11 years now. Furthermore, its primary market, the US, is exciting, as it is vast and lucrative.
From a bearish view, forays into the Middle East and African markets could provide huge growth. However, geopolitical instability could curb performance growth, which is something I’ll keep an eye on. Furthermore, intense competition in the US could hurt performance and returns too.
A dividend yield of 3% isn’t the highest, but a great track record and growth story to date with potential to keep growing help my investment case. However, I’m conscious that dividends aren’t guaranteed, and past performance is not an indicator of the future.
Personally, I’d be willing to buy some shares in both stocks when I next have some investable cash.
