I’d avoid the BT share price and buy this FTSE 100 stock instead

The BT share price looks cheap, but the company could struggle over the next few years. This FTSE 100 growth stock could be a better buy.

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In my opinion, the BT (LSE: BT-A) share price could be one of the most attractive investments in the FTSE 100 today. That’s if the company gets everything right over the next few years. I think there’s a 50/50 chance of this happening.

BT share price headwinds 

Historically, the company has been a pretty poor investment because the business has underinvested in its operations. Rather than deploying money to improve its telecommunications network across the UK, the organisation has spent billions of pounds on its pay-TV business, dividing the organisation.

By taking on larger competitors such as Sky and Amazon, BT has had to split its resources. This has allowed its competitors in the telecoms sector to take market share.

Therefore, rather than being really good at one thing, BT has become average at two. That’s not produced the best outcome for investors. Over the past five years, shares in the company have fallen nearly 70%, excluding dividends. 

However, BT now seems to have realised its past mistakes. The company has been investing in its network over the past two years, and investors seem to be noticing. The BT share price has increased in value by nearly a third over the past 12 months. 

If the company can continue on this track, I think the FTSE 100 stock could be a good investment. But that’s far from guaranteed. BT has an unrivalled telecoms network across the UK, which is a substantial competitive advantage. It’s also a household name. I think this gives the firm an edge over its competitors. By doubling down on these advantages, BT could have a bright future.

Nevertheless, I wouldn’t buy the stock today because I want to see more business progress first.  Therefore, I have been considering adding Burberry (LSE: BRBY) to my portfolio instead.

FTSE 100 growth 

Unlike BT which, in my opinion, has been trying to do too much, Burberry knows what it does best, and the business has not deviated from its strengths. By looking at the profitability of these two businesses, we can see how the different approaches have worked. Between 2015 and 2019, BT’s profit fell 22%. Burberry’s profit, on the other hand, increased by 1%. 

Granted, that doesn’t make Burberry the world’s fastest-growing business. It faces many of its own challenges. Fashion is a viciously competitive industry, and Burberry has paid the price by not staying on the top (although this is now starting to change). The group is also subject to economic conditions. Over the past year, its sales and profits have plunged as most of its stores have been forced to close. 

Still, compared to the BT share price, I think Burberry has a much brighter long-term outlook. By concentrating on what it does best, I think the FTSE 100 business can build on its existing strengths and ride the economic recovery over the next few years.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Burberry and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. 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.

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