The FTSE 100 is full of the biggest and — I think — most exciting companies. Every so often, I search the index for firms to add to my portfolio. I generally operate a long-term buy-and-hold strategy. I’ve found two interesting businesses to buy next month. Why am I attracted to these companies? Let’s take a closer look.
FTSE 100 stock #1: SSE
SSE (LSE:SSE) is an electricity firm specialising in renewable energy. It currently trades at 1,921.5p.
The first reason why this business stands out is its consistent financial record. For the year ended March, between 2020 and 2021, pre-tax profits grew almost five times from £587m to £2.5bn.
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Over the same period, revenue was steady at around £6.8bn. Not the same growth as pre-tax profit, but nevertheless a great degree of consistency.
It should be noted, however, that past performance isn’t necessarily indicative of future performance.
In February, the firm increased its guidance for adjusted earnings-per-share (EPS) from 83p to 90p.
The following month, it increased EPS guidance further, to 97p. This was chiefly because better weather conditions permitted greater renewables output.
Investment banks Citi and Berenberg have both recently upgraded SSE to ‘buy’. Both of these institutions believe that the company will continue to benefit from global efforts to transition to cleaner forms of energy, away from fossil fuels.
There is a risk, however, that energy regulator Ofgem may seek to tighten regulation around energy firms. This tightening could eat into future profit margins.
FTSE 100 stock #2: Harbour Energy
Harbour Energy (LSE:HBR) is an oil and gas business operating globally. It’s currently trading at 448.7p.
The firm rebounded strongly from a difficult time during the pandemic. In 2020, the company posted a pre-tax loss of nearly £1bn. By 2021, this had turned into a pre-tax profit of £314m.
Furthermore, revenue increased from £2.4bn to £3.4bn. With oil at historically high prices, Harbour Energy is enjoying these conditions, as demonstrated on its own balance sheet. Brent crude oil, for instance, is currently trading above $110 per barrel.
For the three months to 31 March, net debt fell from $2.3bn to $1.7bn, while production levels increased by around 35% year-on-year.
There are still risks associated with investment in this firm. The emergence of any new serious pandemic variant could lower the share price because global demand for oil may dry up.
When the pandemic hit in March 2020, for instance, the price of Brent crude oil plummeted to $24.92 per barrel. A similar event could have a negative impact on Harbour Energy’s share price.
Overall, investment in these companies is not without its risks. Nevertheless, they show signs that they’re benefiting from favourable operating conditions. I’ll be buying shares in both firms soon, with a view to holding for the long term.
