FTSE 100 investors may be in for a six-year bull run if the UK follows America’s lead (again).
Chief investment strategist Ed Yardeni of Yardeni Research issued a bullish note last week predicting a 50% increase in the US Dow Jones Industrial Index.
He thinks it may get there by 2030 – in just six years’ time.
Is FTSE 100 at 12,000 coming?
According to Yardeni, American companies in the index need to increase their earnings by 60%. Then, if those earnings attract a price-to-earnings (P/E) ratio of 20, the Dow will hit the target.
Companies would need to achieve a compound annual growth rate for earnings of about 7.9%. Possible, but not easy. However, Yardeni is using the ‘roaring 20’s scenario’ from his bag of predictive models.
There’s no doubt things look good for stocks and businesses on both sides of the Atlantic right now. With the prospect of interest rate cuts ahead, conditions for consumers and businesses are set to get better.
However, the economic landscape can change fast and we never know when the next shock or disturbance will occur. There’s no such thing as a guaranteed outcome when it comes to investing in stocks, shares, and businesses.
Nevertheless, if Yardeni’s right about his positive predictions, the UK’s stock market will likely join the party and follow America higher. If the FTSE 100 rises by 50% by 2030, it’ll hit about 12,000.
But regardless of potential outcomes for the main indexes, I reckon there’s a lot of good value around among UK-listed shares right now. Many companies have decent prospects for growth, and it looks like a great time to roll up sleeves and get down to some deeper stock research.
Supplying key industries
For example, I’m keen on Luceco (LSE: LUCE). The company supplies electrical vehicle (EV) chargers, light-emitting diodes (LED) lighting systems, wiring accessories, and portable power products.
But it’s not the only business operating in those key markets. So one of the risks for shareholders is that competition could eat into the firm’s market share or profitability.
However, City analysts have pencilled in some robust-looking forecasts for normalised earnings. They expect a rise of about 11% this year and 18% in 2025.
On 14 May, the company released a robust first-quarter trading update declaring a strong start to the year.
Looking ahead, chief executive John Hornby said industry metrics are starting to suggest “more favourable” trading conditions. Meanwhile, the directors are finding new opportunities for growth investments, organically and via potential acquisitions.
I like the strong-looking balance sheet here, which shows net cash rather than net debt. It’s a good back-up for the firm’s growth ambitions.
Meanwhile, with the share price in the ballpark of 178p (21 May), the forward-looking earnings multiple for 2025 is around 13 for 2025.
There’s no guarantee the business will hit its estimates, but I think the valuation is fair given the company’s prospects for growth.
The bullish stock market right now is a good environment for helping growth stocks to flourish. So I’d dig in with deeper research into Luceco now. It has the potential to sit well in a diversified portfolio.
