With many FTSE 100 companies already on a rally in 2024, here are two investments that I believe can keep it up.
Investing in everyday essentials
Bunzl (LSE:BNZL) distributes essential non-food consumable products all around the world. It has a special focus on supply chain efficiency and customer-centricity. The company is driving growth across multiple industries through strategic acquisitions.
Currently, the shares are selling around all-time highs, with the price growing over 35% in the last three years.
The good news is that, based on future earnings estimates, I think the company can continue its growth trajectory. Analyst estimates indicate a compound annual growth rate of 2% for earnings over the next three years. While that might not sound a lot, it’s stable, which I like. However, it’s certainly not as appetising as the growth was previously.
There’s also a risk that the shares aren’t selling at any meaningful discount right now. Its median price-to-earnings ratio over the past 10 years is 23, and right now, the ratio is 19.5. But because of the slower growth analysts are expecting, I wouldn’t exactly call that a bargain. Thankfully, though, it means the shares aren’t overvalued.
Next up
Next (LSE:NXT) is a British retailer that sells clothing, footwear, and home products across the globe. It is well known for its store network, its online shop, and the Next directory, which helps customers shop for products from the comfort of their home.
These shares are also selling around the highest point they’ve ever been. But in the past three years, the investment has only seen a gain of 6.4%. That’s lower due to a big sell-off in 2022.
While that might sound lacklustre, I believe the company has some significantly strong future plans to provide better growth from here on out.
For example, the company is planning to further expand its digital footprint. I think that’s a great move, even considering the firm already has over 50% of its operating revenue from online sales.
Next has decided to adopt new 24-hour working shift patterns and provide greater support for warehouse activities. This should optimize its online capabilities, and it seems to be taking a leaf out of Amazon‘s book.
In terms of value, Next’s median price-to-earnings ratio over the past 10 years is 13.2. At the moment, its price-to-earnings ratio is 14.9. That means the shares could be selling at a premium of around 12.9%. That’s a note of caution and potential risk if I invest.
Another thing I don’t like about Next is its balance sheet. It has a lot more liabilities than equity, so it could find its expansion plans inhibited somewhat as a result.
I’m saving my cash for the best
These are two great companies, and I have no doubt about that. But honestly, I don’t think they’re some of the best, and I can’t see enough value and growth here for a really strong investment case.
As someone who takes pride in every company I invest in, I like to look for opportunities that are rare and likely to have outsized returns. I don’t necessarily want average, and I think that’s what Bunzl and Next provide: good growth but typical returns over the long term.
Therefore, I won’t be investing in either business.
