Some FTSE 100 stocks look like unmissable opportunities to me. Two picks I’ve got my eye on are Associated British Foods (LSE: ABF) and Aviva (LSE: AV.).
Here’s why I’d love to buy some shares in both picks when I next have some cash to invest.
Food and clothing
Associated British Foods – better known as ABF – is perhaps best known for production of popular food brands, as well as sugar. Many people don’t know that it’s the owner of the popular Primark brand too.
From a bearish view, I’m wary that retail businesses face significant challenges. These include inflation, which can take a bite out of profits, and these same profits underpin returns. Furthermore, the changing face of retail linked to the e-commerce boom may be trickier to navigate for more established firms like ABF, so competition is something I’m wary of.
However, the pros outweigh the cons by some distance, if you ask me. Firstly, I reckon ABF’s food business offers it defensive traits, as everyone needs to eat. Plus, it’s built up an excellent reputation through quality, and this is shown through consistent performance which shows brand power.
Next, I’m particularly buoyed by Primark’s progress to date, as well as future prospects. The fast-fashion industry continues to grow, and Primark seems to be the leader of the movement. Continued expansion domestically and globally could catapult earnings and returns to another level.
Finally, the shares look great value for money on a price-to-earnings growth (PEG) ratio of just 0.4. Any value under one is usually considered undervalued. Plus, a dividend yield of close to 3% is attractive. Although dividends are never guaranteed, I can see this rate of return growing.
Insurance and wealth management
In some cases, I reckon buying shares in the biggest and best firms in their respective industries is a no-brainer. This is even more so when the fundamentals look good too. Aviva ticks all these boxes for me.
I’ll start with the fact that a wide presence, excellent performance track record, as well as shareholder return policy in years gone by is not to be sniffed at. Plus, the business has recently undergone a mini-transformation to make it leaner and more profitable.
As part of that transformation, the business is looking to keep up with the times to ensure it is one step ahead of its competitors. A great example of this is using artificial intelligence (AI) to process claims, as part of its wider digitization overhaul.
Plus, I see future earnings and returns growing too. A big part of this is Aviva’s dominant market share in the life insurance and wealth management businesses. As the UK population is ageing, many of us continue to plan our retirement years. Aviva can capitalise on this trend.
However, there are risks involved that could hurt the business. From a shorter-term view, economic volatility means consumers are battling with higher essential bills such as mortgages, energy, and food inflation. This could have an impact on new business, overall earnings, and even potentially returns.
Speaking of returns, I think a mammoth dividend yield of 7.1% is too attractive to ignore to help me build wealth through dividends.
