I think there are some good opportunities in FTSE 100 shares right now. An uncertain economic environment is weighing on prices, making this a good time to buy.
The index as a whole has stalled since the start of the year. But I see this as an chance to make investments that can help investors like me build long-term wealth.
Building wealth
Building wealth in the stock market is simple – it involves buying shares that will be worth more in future than they are today. This can happen in three main ways.
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Revenue growth is the most obvious way to achieve this. Other things being equal, this means greater earnings, which increases the value of the stock.
Margin expansion is another possibility. If a company can make the same revenue, but with lower costs, this increases profits and pushes the value of the stock higher.
Buying back shares is a third strategy. Even if revenue and margins remain stable, if there are fewer shares, then each gets more of the cash the company generates.
So which shares looks like they can increase in value like this? Two stand out to me at the moment.
Rightmove
Top of my list of FTSE 100 shares is Rightmove (LSE:RMV). There’s a lot to like about this business in my view, but I’d like to focus here on its share buybacks.
Over the last 10 years, the company has reduced its share count from 1,024 to 838. And it’s continuing to use its excess cash to repurchase its outstanding shares.
Even if the company’s revenue and profit hadn’t grown at all, its earnings per share would have gone from 7p to 9p. As a result, their value would have increased.
Obviously, Rightmove has grown its revenue over the last decade. But even if this stalls, I think share buybacks can keep increasing the value of the stock for some time.
The biggest risk with the company is the uncertainty over its future direction. With a new CEO in place, there’s a question of how the business will move forward.
Overall, though, I think the company has a clear route to increasing the value of its shares over time. I’m looking to add it to my portfolio later this month.
Bunzl
Bunzl (LSE:BNZL) is another FTSE 100 stock that I think is growing impressively. The distribution conglomerate is much more about revenue growth than share buybacks.
Over the last decade, the company has grown its revenues at an average of 7% per year. It has done this through a mixture of organic growth and acquisitions.
Growth by acquisition means there’s always a risk of overpaying for a deal. But Bunzl has an experienced management team and a good record in this area.
The company also has an important advantage when it comes to making deals. Its scale means it can often improve the businesses it brings under its umbrella.
As a result, Bunzl is able to justify paying a higher price than a competitor for a potential target. This makes me think it will have opportunities to keep growing for some time.
I would expect Bunzl’s shares to be worth a lot more 10 or 20 years from now. That’s why I’m looking to add these to my portfolio in July.
