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Here’s where I’m seeing value in the FTSE 100 right now

Scene depicting the City of London, home of the FTSE 100
Scene depicting the City of London, home of the FTSE 100

The FTSE 100 has suffered a big pullback. Only a few months ago, the index was near 7,600. Today however, it’s below 6,900 points.

But as a long-term investor, I’m looking at this pullback as a buying opportunity. With that in mind, here’s where I’m seeing value in the FTSE 100 right now.

Attractive long-term growth story

Let’s start with the healthcare sector. Here, I’m seeing value on offer from hip and knee replacement specialist Smith & Nephew (LSE: SN). At present, it’s trading on a forward-looking price-to-earnings (P/E) ratio of 13.

I own Smith & Nephew shares and I plan to buy more soon. I like the fact it’s a relatively ‘defensive’ company with an attractive long-term growth story (the world’s ageing population should drive demand for joint replacements).

I also like the nice dividend yield on offer. At present, the yield here is over 3%.

It’s worth pointing out that, like a lot of companies, Smith & Nephew is facing a few challenges at present due to supply chains and inflation. However, I think a lot of this is already factored into the share price.

Big dividend increase

Moving on to the financial services sector, I’m also seeing value in wealth manager St. James’s Place (LSE: STJ). Its share price has come down from above 1,700p to near 1,000p this year. It also has a P/E ratio of 13.

The reason I’m bullish here is that managing wealth these days is incredibly challenging. High stock market volatility, falling bond prices, tax changes, inflation… these are just some of the challenges we all face. This complexity should boost demand for the company’s services.

Looking beyond this, one big appeal of STJ is the dividend. This year, the company is projected to pay out 54.9p per share, which equates to a yield of around 5.5% at the current share price. It’s worth noting that the group just raised its interim dividend by a whopping 35%.

A risk to consider here is that STJ’s share price tends to fluctuate quite a bit with market volatility. If the FTSE 100 continues falling, returns from this stock could be disappointing.

In the long run however, I think the stock has the potential to generate solid total returns (capital gains and dividends) for me. I’m very tempted to add it to my portfolio.

A FTSE 100 profit machine

Finally, I like the look of online property powerhouse Rightmove (LSE: RMV) right now. The stock (which I already own) is currently trading on a forward-looking P/E ratio of a little under 20.

Now obviously the UK property market could be in for a challenging period due to the fact interest rates are rising so quickly (although this could be offset by the cut to stamp duty). This could have implications for Rightmove in the near term.

However, looking further out, I think this FTSE 100 company will continue to prosper. Britons remain obsessed with property, and Rightmove is the leader in the property portal space with a market share of over 80%.

It’s worth noting that Rightmove is also an extremely profitable company. Last year, its return on capital was about 280%. Over the long run, companies that generate high returns on capital tend to be good investments.

With the stock currently trading below 500p, down from near 800p late last year, I think it’s a good time to buy more shares for my portfolio.

The post Here’s where I’m seeing value in the FTSE 100 right now appeared first on The Motley Fool UK.

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Edward Sheldon has positions in Rightmove and Smith & Nephew. The Motley Fool UK has recommended Rightmove and Smith & Nephew. 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 2022