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What a 12 months it has been for London’s flagship FTSE 100 index of main shares!
The Footsie has hit a sequence of all-time highs, together with final month. May this sturdy momentum doubtlessly proceed into the autumn and maybe past?
Nonetheless causes to be cheerful
I see some causes to suppose that it might.
Regardless of having gone up by 12% thus far this 12 months, the London market nonetheless appears cheaper than another main bourses.
With geopolitical volatility main some buyers to broaden their horizons, London is attracting some cash from abroad. Together with funding by locals, that might assist preserve the market buoyant.
In the meantime, considerations resembling weak British financial efficiency and an unsure outlook for worldwide commerce don’t appear to be dampening investor sentiment in the direction of the FTSE 100 as far as a lot as some buyers could have anticipated.
Tons nonetheless to be seen
Nonetheless, whether or not that may change is unclear.
For now, the market is buoyant and I do see a risk that it’s going to stay that method. In that case, the FTSE 100 might transfer even increased from right here in coming weeks and months.
However what considerations me about this 12 months’s rally up to now is that it has largely been despite — moderately than due to — financial fundamentals. This hardly seems like essentially the most promising second in Britain’s financial historical past, so it strikes me as a bit of odd that the FTSE 100 has been going from energy to energy.
I’m avoiding the index – right here’s why
For now, I’ve no plans to put money into any FTSE 100 tracker funds.
However I do suppose that some particular person shares within the index might but develop into a discount at their present worth.
For instance, one FTSE 100 share I added to my portfolio this 12 months is janitorial provides wholesaler Bunzl (LSE: BNZL). Whereas the index has been performing strongly this 12 months, that was not due to Bunzl. The Bunzl share worth is down 22% thus far this 12 months.
It has been doing higher currently, although, transferring up 15% over the previous month. I hope that this may very well be the beginning of a long-term restoration within the worth.
At 18 instances earnings, Bunzl doesn’t now look clearly low cost for my part. In any case, its enterprise perofmance this 12 months has been weak, with fundamental earnings per share within the first half down 6% 12 months on 12 months. The North American enterprise has been underperforming and I see a danger this might proceed.
However as a long-term investor, I like Bunzl’s confirmed enterprise mannequin, massive buyer base, and robust place in key markets.
Whereas it has some work to do to regain investor confidence, whether it is ready to take action and enhance enterprise efficiency, then the present worth might develop into extra of a discount over time than it presently appears.
That’s the reason I’ve been shopping for the FTSE 100 share for my portfolio.
