Looking at the FTSE 100 today, stocks that I’d like to invest in include DS Smith (LSE:SMDS) and Johnson Matthey (LSE:JMAT). They’re long-established companies operating in specialist areas with clear future growth prospects. Here’s why I’d buy them.
DS Smith shares rise
The DS Smith share price is up 34% in a year. The pandemic caused its profits to take a hit last year, but analysts are predicting better earnings ahead.
It’s a packaging company servicing the fast-moving consumer goods and e-commerce sectors. This is an area showing increasing demand as lockdowns have accelerated the shift to online shopping. And many believe this is now on a faster long-term growth trajectory than it was pre-pandemic.
DS Smith DS Smith has been around for over 80 years. Today it’s a £5.7bn company with a price-to-earnings ratio of 10 and earnings per share are 38p. Its dividend yield is 1.3% and earnings cover this a healthy 7 times.
It’s hoping to raise its global presence. But a downside is that it’s accumulated considerable debt through its expansion process. During the decade from the 2008 financial crash to 2018, its share price soared. Since then, its growing debt pile has held it back.
Its price is nearly 5% down from its 52-week high but up 77% from its 52-week low so clearly, the DS share price has experienced some volatility in the past 12 months. Last month there were rumours packaging rival Mondi could be interested in acquiring it, but so far that’s not come to anything.
Nevertheless, I like what I see and I’d happily buy shares in this FTSE 100 stock.
Johnson Matthey share price up 70%
Johnson Matthey is a world leader in producing specialist chemicals and precious metals. It’s a globally focused company with many strings to its bow. In the past year, the share price has risen nearly 70%.
JMAT creates the enamels used in vehicle production. These strengthen car parts ensuring durability. It also makes emission control technologies and battery materials, including filters and catalysts for ice, hybrid, and electric vehicles.
It also refines and recycles platinum group metals (PGMs), which are in high demand. Johnson Matthey is also developing a low carbon hydrogen product with future growth potential.
The Johnson Matthey share price experiences regular volatility. I think operating in the electric vehicle space has contributed to this. EVs have been hot stocks this past year, and everything related to them is highly volatile.
A FTSE 100 stock with growth potential
From its health department, it makes some of the active pharmaceutical ingredients used in generic opioid addiction therapies. This is another area with growing demand. Having taken a strategic review of its health business, JMAT now expects its annual performance to meet the top end of market expectations. This news boosted its share price.
It’s also enjoying strong demand for its clean air products from Asia. And has several projects in the pipeline.
This is a well-established business with an excellent reputation. It has a 1.8% dividend, and earnings per share are £1.32. At around £31 a share, it’s down 6% from its 52-week high and up nearly 73% from its 52-week low. I like what I see and think its ability to help the world decarbonise is throwing up plenty of opportunities to sell its specialist products.
I think this FTSE 100 stock looks like a good addition to my Stocks and Shares ISA.