The FTSE 100‘s been on a terrific run in 2024. Since January, the UK’s flagship index has generated a 10% total return for investors, exceeding the 6% average that it’s usually generated over the last decade.
Seeing the stock market rally following a prolonged period of decline is hardly a surprise. After all, that’s exactly what’s happened for centuries. Yet, with the catalyst of both interest rate cuts as well as the return of GDP growth, forecasts for 2025 are looking quite bullish.
Analysts from The Economy Forecast Agency now expect the FTSE 100 to potentially surpass the coveted 10,000 point threshold by as early as October next year. In other words, the index could be set to enjoy another double-digit jump over the next 12 months.
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Forecasts always need to be taken with a pinch of salt. But they’re still a handy tool for judging investor sentiment. So let’s assume these latest predictions of a further market rally are true. Which stocks should investors buy to capitalise on this opportunity?
Finding the best stocks
The FTSE 100 might be up by 10%, but plenty of its constituents are up considerably more. The spectacular turnaround Rolls-Royce has delivered is close to 80% gains. Meanwhile, Barclays has surged closer to 50% over the same period.
Yet when finding the best stocks to buy right now, my attention isn’t drawn to the winners, but rather the losers. In many cases, when a company falls from grace, it’s for a good reason. However, occasionally, panicking investors who are overly focused on short-term challenges end up creating long-term buying opportunities. And that’s what’s brought B&M European Value Retail (LSE:BME) onto my radar.
A discount retailer at a discounted price
With inflation ravaging households, B&M has had little trouble attracting customers to its stores. However, now that economic conditions have significantly improved, it seems many shoppers are returning to their usual supermarket destinations.
As such, B&M’s latest results were a bit lacklustre in terms of growth. Tough comparables paired with a seeming lack of customer stickiness aren’t a great combo. So it’s no surprise to see shares of this FTSE 100 stock take a 26% tumble since the start of the year.
However, this sell-off seems to have been overblown. While sales are slowing, some normalisation was to be expected after such a terrific trading period. At the same time, international operations in France are still delivering solid results as the highest growth segment in the business – a trend that’s expected to continue.
In other words, while B&M’s undoubtedly having some short-term growth pains, the long-term potential of this business remains fundamentally sound, in my eyes. So with shares trading at a price-to-earnings ratio of 11.4 versus the industry average of 18, it seems a buying opportunity’s emerged. That’s why I’m planning to use the recent volatility to snap up some shares for my portfolio before the stock market rally, once I have more capital at hand.
