Fragile market confidence means the FTSE index remains stuck around the 7,000-point marker.

I didn’t dash for cover even as the spectre of a fresh stock market crash emerged. In fact I looked for UK shares to buy as most others panicked. Investing as others flee for cover could boost my chances of becoming a stock market millionaire.

Listening to Warren Buffett

A great many of these investors would have made a stinking great loss by frantically selling their shares for less than they bought them for. They’d have failed legendary investor Warren Buffett’s most important tests: “Rule Number One: Never Lose Money. Rule Number Two: Never Forget Rule Number One.”

Investors who manage to master their emotions and ignore the market noise can avoid these painful losses. But this isn’t the only advantage.

Those who hold their nerve can take advantage of market panic to possibly make a fortune.

Just one FTSE 100 bargain

Humans are herd animals. We’re hard-wired to follow what the broader pack is doing. What’s more, we find it hard not to be governed by emotion when things get tough.

This is a toxic combination when it comes to investing. And it’s why a wide range of quality FTSE 100 stocks have been frantically sold off in recent weeks.

Take Dechra Pharmaceuticals as an example. In early September it reported “strong organic growth” in the first half as sales of its animal medicines rocketed 14% and underlying operating profits grew 9%.

Dechra faces a threat from increased costs, sure. But with meat consumption rising and plenty of scope for earnings-boosting acquisitions, the future here remains extremely bright.

Yet its share price has crashed by almost a quarter over the past month. This is just one great dip opportunity that I, as a FTSE 100 investor, have a chance to exploit.

Making stock market millions

Buying on the dip is a strategy that has created an abundance of stock market millionaires over the years.

Research in March showed that the number of US millionaires surge to an all-time high of 14.6m in 2021. According to financial researcher Spectrum Group, this jump was driven predominantly by wealth generated from domestic stock markets that soared from the troughs struck at the height of the pandemic.

The S&P 500 and Nasdaq US indices recovered 27% and 21% respectively over the course of last year. Those who bought in at the bottom of the market were therefore handsomely rewarded.

Getting rich like ISA investors

This isn’t a modern phenomenon. It’s also not one that’s exclusive to US investors.

According to HM Revenues and Customs there are now more than 2,000 Stocks and Shares ISA millionaires in the UK.

A vast proportion of these wealthy individuals invested heavily when stock markets crashed around the time of the 2008 financial crisis. And they made their fortunes during the following years as corporate profits recovered and share prices rebounded.

History shows that share prices always recover strongly from periods of turbulence. Buying beaten-down FTSE 100 shares today could significantly boost an investor’s chance of making brilliant long-term wealth.

Pharma for animals

As a quick introduction, Dechra is a pharmaceuticals business that provides treatments and products for animals. It uses biotechnology at the core of its operations to create and enhance its products. A lot of its work involves adapting treatments currently used by humans, for animal use.

So what’s happening with the shares currently? Well, as I write, they’re trading for 3,462p. At this time last year, the stock was trading for 5,231p, which is a 33% decline over a 12-month period. I believe the shares have dropped due to macroeconomic factors and a stock market correction caused by events in Ukraine. Many other FTSE 100 stocks have suffered a similar fate in recent months.

The bull and bear case

Let’s take a look at some of the bull and bear aspects of Dechra shares. I’ll start with some positives.

Firstly, I’m buoyed by the fact that pet ownership is increasing, especially here in the UK. Data compiled by the Pet Food Manufacturers Association, which runs a census each year, reported that cats and dogs especially are increasing in numbers. This is good news for Dechra, as ownership increasing means that demand for medical treatments should rise too. This could boost performance and returns.

Next, I can see that Dechra has a good track record of performance. I’m aware that past performance is no guarantee of the future. However, looking back, I can see it has grown revenue and gross profit for the past four years in a row.

Finally, Dechra shares would boost my passive income stream through dividend payments. The current dividend yield on offer is 1.2%. Although lower than the FTSE 100 average of 3%-4%, I would expect this to increase as the business grows. Dividends are never guaranteed, though.

So to the bear case. With pet ownership increasing, competition for pet pharmaceuticals has jumped too. In fact, Dechra itself pointed towards strong EU-based competitors that could affect its market share in a recent update, as well as performance and growth aspirations.

The other issue I have with Dechra is regulation, which is extremely tight in any pharmaceutical sector and can be changed quickly. This could affect it negatively if it were to impact a popular product line or a new drug in development. It could have a bad impact on performance and investor sentiment.

A FTSE 100 stock I’d buy

To summarise, there are positives and negatives when it comes to Dechra shares. I’ve decided I would add the shares to my holdings. This is because I’m buoyed by the burgeoning marketplace as well as the profile and presence of Dechra. Furthermore, the passive income opportunity and performance track record help my investment case.

UK shares: Coca-Cola

Providing that ice-cool hit on a warm day, Coca-Cola is a recognisable drinks brand in every corner of the globe. Listed on the FTSE 100, Coca-Cola HBC (LSE:CCH) is a bottler operating mainly in Europe and Africa. It currently trades at 1,671p, down 26% in the past year.

I see strong growth in its historical results. Between the 2017 and 2021 calendar years, group revenue increased from €6.5bn to €7.1bn, while profit before tax grew from €564m to €734m. As a potential shareholder, I see this growth in both revenue and profit as strong and consistent.

What’s more, earnings per share (EPS) rose from ¢117 to ¢150. By my calculation, this means that this firm has a compound annual EPS growth rate of just over 5%. In addition, the 2021 calendar year operating expenses declined by 1.9%, year on year.

On the other hand, the business recently pulled its guidance for 2022, because of the ongoing situation in Ukraine. It has a production plant in Kyiv and its sales in Russia will likely be affected. While this is a short-term concern, I think it is now factored into the share price and should subside in the near future.  

Veterinary pharmaceuticals

Another great UK share is Dechra Pharmaceuticals (LSE:DPH), which specialises in veterinary pharmaceuticals and biotechnology. Operating globally, it has strong historical results like Coca-Cola HBC. It currently trades at 4,109p, up 21% in the past year.

For the years ending June, between 2017 and 2021, revenue nearly doubled to £608m. Also, profits before tax rose from £28.6m to £74m. 

In addition, EPS grew from 64.68p to 108.77p, resulting in a compound annual EPS growth rate of nearly 11%. As a potential investor, I’m happy to see this level of sustained growth. It should be noted that past performance is not necessarily indicative of future performance.

The company has stated, however, that it faces strong competition on a number of new products within the EU market.

For the six months to 31 December 2021, the firm lifted its interim dividend to 12p per share, up over 8% year on year. This caused investment bank Liberum to raise its price target from 4,000p to 4,020p.

Overall, both of these UK shares exhibit strong growth over time. Given the recent market sell-off, I think they’re both good additions to my long-term portfolio. I will be buying shares in both companies today.

I am looking for companies that have a solid competitive advantage. And I am searching for firms operating in markets that might not be disrupted by the current geopolitical uncertainty. 

With that in mind, here are two FTSE 100 stocks that have recently caught my attention. 

FTSE 100 shares to buy

Veterinary pharmaceuticals group Dechra Pharmaceuticals (LSE: DPH) is one of the UK’s premier blue-chip stocks. 

The company develops and sells pharmaceutical products for the animal industry around the world. This market is very competitive and highly regulated.

Overcoming these challenges are probably the biggest risks to the company’s growth. Nevertheless, the corporation has performed well over the past couple of years by investing heavily in new products and research and development. 

Net profit has grown at a compound annual rate of 34% over the past six years. Analysts are expecting this growth to continue. 

Two trends could drive the company’s sales over the next five to 10 years. Demand for veterinary pharmaceuticals is increasing as the global population is growing. On top of this, the world needs more food, and farming animals is one of the best ways to meet rising demand. Keeping these animals healthy is vital, and Dechra’s products will play an important role here. 

Considering these challenges, I think the FTSE 100 group has a bright future, no matter what happens in Eastern Europe. As such, I would be happy to buy the stock from my portfolio today. 

Market growth

Flutter Entertainment (LSE: FLTR) is one of the largest online sports betting and gaming companies in the world. 

A surge in consumers using its platforms during the pandemic helped the enterprise generate windfall profits in 2020. And management is using this money wisely. The additional cash is helping to fund the company’s expansion in the US, which has the potential to be a massive growth market for the firm. 

That said, the FTSE 100 enterprise is not the only business to recognise the potential of this market. This too is a highly competitive industry, and larger players are throwing money at capturing market share. Flutter needs to keep investing, or it could be left behind. This is the most significant risk the corporation faces today. 

Still, I think it is unlikely the company’s operations will be disrupted significantly by the ongoing political crisis.

As such, I think the FTSE 100 business looks cheap compared to its potential after the recent sell-off. As the enterprise continues to expand around the world, I think it should benefit from increasing awareness of its brands and more significant economies of scale. These should help push down costs and improve profit margins. 

Why I would consider buying Dechra Pharmaceuticals

Dechra is in the business of making animal supplements such as nutrition products, dog food, and veterinary pharmaceuticals. Its customer base includes farmers and pet owners. I think that is an attractive market to sell into. Both farmers and pet owners are motivated to nourish their animals. That means that they are typically willing to spend money on animal nutrition. As quality matters, price sensitivity is lower than it is in some markets. For a manufacturer like Dechra, that can translate into attractive profits. Last year, post-tax profits at the company surged 64%.

Demand is also likely to be fairly robust in mv view. No matter what is going on in the wider world or economy, animals need to be cared for and fed. So Dechra’s area of business will likely see fairly stable demand for the foreseeable future.

The company has built a portfolio of premium brands such as Vetoryl. That gives Dechra pricing power that should help it maintain profits over the long term. As the company grows, it could also benefit from economies of scale.

Valuation concerns

There are risks, of course. The barriers to entry in this area are not very high and a deep-pocketed competitor could take on Dechra, possibly hurting both revenues and profitability. On top of that, although the company helps improve animals’ immunity, Dechra itself is not immune to the impact of cost inflation. That could eat into its profit margins.

But my main concern about buying the stock for my portfolio currently is the Dechra Pharmaceuticals share price. It has crashed 23% since I wrote about my valuation concerns back in August. I think it could still fall further.

Even after the share price fall, it trades on a price-to-earnings ratio of 80. Although Dechra is a growth company with a proven business model in an attractive field, that valuation looks far too high for me. I do not like using adjusted earnings as I find them a less transparent accounting measure, but even using adjusted earnings the P/E ratio is still 37. That is much lower, but is more expensive than I would pay even for a high-quality growth company. Admittedly, it is in line with the P/E ratio of US rival Zoetis. But I think that just suggests possible overvaluation in the whole animal nutrition sector. That does not make Dechra’s price any more attractive to me.

My next move on the Dechra Pharmaceuticals share price

I like the Dechra business and would happily hold it in my portfolio. But, even after the share price has declined in recent months, I do not think the company trades on an attractive valuation. For that reason, I will not be buying it at the current price. Instead, I am waiting to see if it keeps falling far enough to make for an attractive valuation.

Latest financials from Pets at Home this week illustrate how strongly spending on animal care is growing. The FTSE 250 firm claimed it was on course for “a record year of sales and profit growth” for the period to March. This particular spending phenomenon is a global one too.

It’s why researchers at Grand View Research predict the global veterinary medicine market will rise to be worth $30.8bn by 2028. That’s up a whopping $20bn from what it was valued at last year. This is good news for drugs manufacturers like Dechra, of course.

Expensive but exceptional

Dechra has a long track record of unbroken annual earnings growth. It’s a history that’s been helped by a long line of acquisitions to create a top-quality portfolio of animal drugs and boost its global footprint. City analysts are expecting this positive bottom-line trend to continue too. They expect profits to expand 5% and 9% in the financial years to June 2022 and 2023 respectively.

A word of warning however. At current prices, Dechra trades on a heavy forward price-to-earnings (P/E) ratio of 35 times. Such a high valuation could cause a sharp share price reversal if news flow surrounding the company starts to look a little squiffy. In the case of Dechra this could happen, for example, if it encounters trouble with developing a particular potentially-money-spinning drug.

It’s my opinion though that Dechra’s long-standing record of constant profits growth makes it worthy of a handsome rating. And, perhaps more importantly, so does its robust position in a fast-growing market and the company’s lasting appetite for profits-bolstering acquisitions.

Another FTSE 100 share to buy

That said, I also love the thought of loading up on bargains. And that means Ashtead Group (LSE: AHT) remains high on my list. Like Dechra, a robust appetite for acquisitions helped profits at this FTSE 100 share rise consistently in recent years. And while Covid-19 has caused some temporary turbulence, the rental equipment business is expected to storm back straight away.

City analysts think earnings at Ashtead will rise 41% and 18% in the years to April 2022 and 2023 respectively. This leaves the business trading on a rock-bottom price-to-earnings growth (PEG) ratio of 0.5.

Acquisition activity in the past decade has also made Ashtead an industry giant in the US. The company has the balance sheet strength to continue splashing out on acquisition targets as well continuing to deliver monster shareholder returns.

I’d buy more Ashtead stock for my portfolio even though worsening economic conditions in the US could hit demand for its services. In recent days, the IMF has slashed its GDP growth forecasts for the US to 4% for 2022, from 5.2%. But I think the potential rewards here far outweigh the near-term risks.

Could this present a buying opportunity for my portfolio?

Long-term growth prospects

The recent price tumble comes after a strong run for the company’s shares. Indeed they are still up 9% on the past year. Over five years, Dechra has been even more rewarding – the shares have gone up 180%.

That reflects the fact that the company has seen strong growth and operates in a financially attractive industry. Animal nutrition is potentially very profitable, because both farmers and pet owners want to ensure the health of their animals. Revenues tend to be resilient, as animal medical needs remain the same no matter the state of the economy.

Last year, Dechra saw revenues increase 18%. Earnings per share improved even more, jumping 56%. Not only do those results speak to the strength of Dechra’s business model, I reckon it still has a long growth runway ahead of it. For the first half of its current year, the company increased revenues by 15%, excluding currency impacts. This month it updated the market and said its full-year outlook is in line with the upper end of management expectations.

All of that is very positive and at the right price, I would definitely consider buying Dechra for my portfolio. Right now, though, I am steering clear of it. Here is why.

Dechra Pharmaceuticals share price and valuation

A good business does not always make for a rewarding share. For example, investor enthusiasm for a company can push a share price up to a level where the valuation is excessive.

I think Dechra is an example of that right now. After the big jump I mentioned, post-tax profits came in at £56m. Earning more than a million pounds a week from animal supplements shows the business is in rude health. But the market capitalisation – the combined value of its shares – currently stands at £4.4bn. That means that Dechra’s price-to-earnings ratio is 79. I regard that as very high. Even allowing for the prospect of strong earnings growth in coming years I still feel the shares are expensive.

Pricing in risks

On top of that, such earnings growth is not guaranteed. The recent headline revenue growth of 15% excluding currency impact in fact only came to 10% when actual exchange rates were included. Double-digit sales growth is still impressive. But the difference between the two figures is a reminder that exchange rate fluctuations can hurt both revenues and earnings at a company doing business internationally like Dechra.

The company faces other risks to profits, too. In mature markets vets have increasingly been consolidating their practices into large chains. Such chains have strong buying power. That could damage profit margins for animal supplements.

I think this is a good business. At the right price I would be happy to buy its shares for my portfolio to hold for the long term. But I will not be buying at the current Dechra Pharmaceuticals share price.

A FTSE 100 stock I plan to keep

It’s possible that Asia-focused stocks like Prudential (LSE: PRU) could take a hit if China’s economy continues to cool sharply. The latest news on this front wasn’t exactly reassuring. Chinese GDP skidded to 4% in the fourth quarter of 2021, versus 4.9% three months earlier. A continuation of this deterioration has the potential to deliver a considerable shockwave across all of its emerging markets.

I own Prudential stock. But as a shareholder, I’m not wringing my hands with concern. As a long-term investor I’m prepared to endure a little near-term turbulence as I think this FTSE 100 share will deliver mighty earnings growth in the years ahead. Prudential has one of the strongest names in the financial services business and I’m expecting it to thrive as personal wealth levels in Asia increase.

Researchers at Mordor Intelligence recently commented that “the Asia-Pacific region holds the key to the future of the insurance industry”. They cite the impact of fast economic growth, rising incomes, and the fact the region houses one-third of the global population, as reasons why demand for such financial services products could leap.

Prudential’s new business profit soared 25% in the first half of 2021, its most recent financial update showed. Low penetration in its life insurance markets — combined with those soaring income levels among its far-flung customers — makes me believe company earnings should rise strongly all the way through to 2030.

Another UK share set for big profits?

The amount we’re all spending on pets has ballooned over the past decade. And by all indications, the amount we fork out on our four-legged friends looks set to continue surging. This is why I’d buy Dechra Pharmaceuticals (LSE: DPH) today. This new FTSE 100 entrant manufactures the drugs that keep animals happy and healthy.

Sales at Dechra rose 10% in the six months to December, latest financials showed, beating City forecasts. The company’s strong performance reflects the rapidly-expanding market in which it operates as well as the effectiveness of its acquisition-based growth strategy.

Last week, Dechra bought the worldwide rights to canine cancer battler Laverdia to keep its programme going too. This follows the six acquisitions it made between July to December.

Drugs development is extremely risky business and problems can be common. This can result in significant lost revenues and a massive upsurge in cost. Still, it’s my opinion that Dechra’s immense sales opportunities more than offset this risk. Analysts at Global Market Insights think the worldwide animal drugs industry will be worth $46bn by 2027. That’s up considerably from the $32.2bn it was worth in 2020.

Dechra has around 5,700 registered products which it sells across the globe. And it’s a number that’s set to keep growing as additional acquisitions come down the pipe.

UK shares to buy for growth

One of my favourite companies on the London Stock Market at the moment is animal pharmaceuticals group Dechra (LSE: DPH). 

While this company is a little more expensive than the sorts of businesses I am usually attracted to, I think it is worth paying a premium to take part in its ongoing growth. At the time of writing, the stock is trading at a forward price-to-earnings (P/E) multiple of 42. 

Considering its portfolio of unique products, I do not think this is too demanding. What’s more, Dechra’s growth has been nothing short of outstanding over the past six years. Net profit has grown tenfold since 2016. 

Investors should never use past performance to guide future potential. However, in Dechra’s case, it shows the company has the skills and drive required to develop and market new animal treatments. 

If this trend lasts and earnings continue to grow, I do not think I will regret paying a higher multiple for the shares today. 

That being said, the organisation does not have exclusive rights over the animal pharmaceutical market. This is a competitive industry, and growth is not guaranteed. If Dechra fails to invest enough, it may struggle to maintain its market share. 

Slow and steady

Infrastructure is not the most exciting sector. Nevertheless, investing in it is essential for countries around the world. 

3I (LSE: III) manages a selection of infrastructure funds and private equity businesses. The company is unlikely to achieve the sort of growth Dechra has recorded over the past six years. However, I believe that as long as there is a demand for maintaining and growing infrastructure, 3I will have growth potential. 

The company is also a dividend champion. Infrastructure and maintenance and construction contracts are usually inflation-linked. This suggests 3I’s profits should grow in line with inflation.

That also implies management could increase the company’s dividend at a similar rate, providing some protection in an inflationary environment. There is also potential for dividend growth as the infrastructure market expands. 

At the time of writing, the stock supports a dividend yield of around 3%. 

These are the reasons why I would buy the company for my portfolio of UK shares. It is a defensive income champion with the potential for substantial growth over the next few years.

Potential challenges the group could encounter include higher interest rates, which may increase the cost of its borrowings. Further coronavirus restrictions would also disrupt operations and reduce income. 

Ashmore (LSE:ASHM) was on a storming run before Covid-19 arrived. It’s shares were on a 12-month gain of 40% immediately prior to the crash. Ashmore is an investment manager specialising in emerging markets. Yes, those emerging markets, hard hit by the coronavirus and lacking the first-world resources to deal with it.

It’s no surprise then that since mid-February 2020, the Ashmore share price is down nearly 30%. The FTSE 250 index meanwhile, has recovered to a 10% gain. On the upside though, times like these can provide great opportunities to invest in quality companies while they’re cheap. That is, providing they survive with sufficient liquidity.

Ashmore looks to be in a strong position on that front, and assets under management grew in the fourth quarter. Full-year results are due on 3 September, so we’ll know more then. Investing in emerging markets is risky at the best of times, and they may be the slowest to properly recover. But Ashmore is on my growing shortlist.

Pills and potions profits

Some pharmaceutical companies have done well during the pandemic, some not so well. Dechra Pharmaceuticals (LSE: DPH) is firmly in the first group. Its shares are up 75% over two years, and up nearly 300% over five. But what’s so surprising about that during Covid-19 days?

Well, the FTSE 250 veterinary medicines specialist isn’t even in the human market, never mind anything to do with coronaviruses. All this progress has come from its work for cats, dogs and horses. It’s clearly a lucrative market, as July’s year-end trading update makes clear. Revenue rose by 18%, with strong international progress. European revenue grew 20%, with a 22% increase in the USA.

The risk is that Dechra shares might be overvalued now, and they do seem to be pushing their way to high-growth P/E multiples. Should we see a future period when the figures fail to meet expectations, could the share price fall? It might. But I’m going to wait for full-year results on 6 September before I make up my mind.

Lagging the FTSE 250

If the financial and pharmaceutical sectors carry high risk, surely soap is a safe business? That’s what I think when I look at PZ Cussons (LSE: PZC), ahead of final results due on 22 September. The problem is, we’ve seen earnings deteriorating for the past few years, with a corresponding dip in the dividend.

But in its July update, the company said pre-tax profit is “expected to be ahead of consensus and the prior year.” Revenue is up 7%, margins are improving, and the balance sheet is apparently better too. Cussons says net debt is falling, and lower than last year. I’ll need to see the actual numbers, but I find that encouraging.

The share price has badly lagged the FTSE 250 over the past five years, dropping nearly 30%, while the index has grown by a similar percentage. Over the past two years though, the two are closer. Is Cussons good value now? I’ll make my mind up when I see the results.