The rising prices of gold and Bitcoin over recent months are likely to cause investors to contemplate buying them. However, there may be more attractive buying opportunities within the FTSE 100. Despite rising in 2019, the index seems to offer good value for money, which could lead to strong returns in the long run.
With that in mind, here are two large-cap shares that seem to offer improving growth outlooks. They could deliver rising share prices as they execute their growth strategies. As such, now could be the right time to buy them.
Burberry (LSE: BRBY) is undergoing a period of significant change that is being welcomed by investors. Its shares have risen by 29% in the past year and could continue their gain as the company delivers on its revised strategy.
This includes refreshed designs across its products, as well as a shift towards even-higher-priced items that may produce larger margins for the business. Burberry is also rationalising its store portfolio to improve its returns, while its expansion into markets that offer relatively strong long-term growth potential, such as China, could catalyse its financial performance.
Clearly, an uncertain outlook for the world economy could hold back the company’s shares. However, its recent update suggested that demand for its products is high and could increase as it rolls out its strategy.
Trading on a price-to-earnings (P/E) ratio of 25, the stock is not cheap. However, it is due to post a rise in net profit of 10% next year. A similar rate of growth may be achievable over the long term as the business benefits from rising disposable incomes in many of its key markets.
Another FTSE 100 share that has long-term growth potential is alcoholic beverages company Diageo (LSE: DGE). Its recent trading update highlighted the efficiency improvements it is making that could lead to higher margins over the medium term. The company is also benefitting from high demand across its major markets that is expected to continue in the coming years.
With the company having focused on rationalising its brand portfolio and innovating its existing products, it offers an increasingly favourable financial outlook for investors. Alongside this, Diageo’s wide geographic spread and strong position in multiple market segments provide it with a degree of stability which is somewhat uncommon within the consumer goods industry. As such, its risk/reward ratio could prove to be highly attractive.
Since the stock trades on a P/E ratio of 23, it is relatively expensive compared to many of its FTSE 100 index peers. However, its solid track record of growth and its long-term financial outlook mean that it may be worthy of a premium valuation. Therefore, with rising wages across the emerging world expected over the coming years, now could be the right time to buy it.
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Peter Stephens owns shares of Diageo. The Motley Fool UK has recommended Burberry and Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020