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Properly, that’s one other file damaged. As has already occurred a number of occasions thus far this 12 months, the FTSE 100 index of main British shares hit a brand new all-time excessive (throughout the buying and selling session, not at its shut) over the previous week.
Might that sign that issues are getting costly – or may there nonetheless be worth within the FTSE 100?
Not trying wildly costly
The worth-to-earnings (P/E) ratio of the index general is round 16.
To me, that doesn’t scream of an apparent cut price. By the identical measure, although, the index doesn’t essential look that costly.
Sure, the P/E ratio is above the place it has spent latest years. However in absolute phrases, 16 feels justifiable to me for a set of the nation’s largest companies.
Issues might get higher
I additionally see some attainable drivers that would doubtlessly assist push the FTSE 100 even greater from right here.
There was appreciable financial uncertainty lately each within the UK and extra extensively, for causes equivalent to world tariff disputes and shifting tax insurance policies within the UK. If the economic system clearly will get higher, then I believe that would assist the FTSE 100.
There was some proof of that recently – the newest quarterly GDP figures from the US confirmed respectable financial progress, for instance. However what stays to be seen is whether or not the economic system is on a sustainably stronger footing. For instance, these GDP figures could have been inflated by corporations and shoppers front-loading purchases to attempt to keep away from deliberate tariff will increase.
I reckon there are some actual bargains
On that foundation, though I can see why the FTSE 100 could push greater, I can also image a scenario the place we see it lose worth.
Stepping other than the broad index, although, and some particular shares inside it, I believe there are some actual potential bargains lurking in plain sight.
Take Reckitt (LSE: RKT) for example. The FTSE 100 shopper items large has already moved up 16% thus far this 12 months. The Metropolis responded warmly to latest information that the End proprietor is streamlining its portfolio to deal with its largest manufacturers. That’s just like what rivals have been doing over the previous few years.
However the Reckitt share worth continues to be 27% beneath the place it was 5 years in the past. That was throughout the first 12 months of the pandemic, when demand for hygiene merchandise like Reckitt’s Lysol had surged.
In itself I believe that factors to the truth that the corporate has rigorously chosen what product classes it might compete in efficiently with its iconic manufacturers. The newest strategic strikes proceed that method and I believe over time they might assist add worth to the agency.
There are nonetheless challenges that would damage profitability. One is ongoing authorized disputes arising from a disastrous acquisition in Reckitt’s diet enterprise just a few years in the past.
However on stability I see the corporate as a robust enterprise with wonderful long-term potential. At its present share worth, I believe it’s a FTSE 100 share traders ought to think about.
