[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Prudential

What it does: Prudential is a life insurance and asset management company operating solely in Asia and Africa.

By Andrew Mackie: Following the spin-off of its UK and US businesses, Prudential (LSE: PRU) is now focused entirely on some of the world’s fastest growing markets. This makes complete sense when one considers its growth drivers. Across Asia, for example, despite rising levels of prosperity, insurance penetration is still extremely low. This market is estimated to be worth $1.8trn.

What I particularly like about Prudential is that it is diversified across geography, channel and product. Not only does this provide it with multiple sources of growth but also adds resilience to its business performance. Its distribution network encompasses over 500,000 licensed agents as well as through partnerships with banks (known as bancassurance).

Prudential’s share price has come under severe pressure throughout 2022. It is down 30% year to date. This has been primarily driven by the ongoing closure of the border between Hong Kong and Mainland China. This has hit revenues in its largest market. However, when one considers the explosive growth potential across several of the regions it operates in, today’s depressed share price offers investors an attractive entry point.

Andrew Mackie owns shares in Prudential.

Games Workshop

What it does: Games Workshop designs, manufactures, and sells fantasy miniatures for its Warhammer tabletop gaming experience.

By Zaven Boyrazian. Games Workshop (LSE:GAW) is arguably one of the world’s most recognised tabletop gaming companies. This is the group behind the immensely popular Warhammer franchises, generating the bulk of its revenue through selling miniatures to hobbyists through its global network of retail partners.

Over the last 12 months, the share price hasn’t been the best performer, dropping by over 40%. It seems investors are growing increasingly pessimistic about the short-term performance of this consumer discretionary business. And the latest trading update did show some shrinkage in profits, as consumer spending takes a hit from the cost-of-living crisis.

However, this drag on earnings ultimately stems from a short-term problem. And with the group’s long-term strategy still intact, backed up by an impressive cash war chest of £71m, I can’t help but see the recent share-price drop as a buying opportunity for my portfolio.

Zaven Boyrazian does not own shares in Games Workshop.

Smurfit Kappa Group 

What it does: Smurfit Kappa manufactures packaging products for e-tailers, supermarkets, consumers and industrial customers. 

By Royston Wild. A slew of positive trading updates from the packaging sector would encourage me to buy Smurfit Kappa Group (LSE: SKG) shares for November. 

The FTSE 100 business released financials of its own on Wednesday, 2 November. I think this could help it to record further healthy share-price gains across the month, and beyond. 

Industry rival Mondi reported a 55% rise in underlying EBITDA in the third quarter, it reported in October. It commented that “higher average selling prices and overall volume growth more than offset significant cost pressures.” 

Shortly before this, DS Smith announced that it expected “very strong” revenues growth in the six months to October. Trading was so strong in fact that the firm lifted its half-year profits forecasts. 

Smurfit Kappa’s cheap share price certainly leaves scope for fresh gains if its own financials impress. The packaging powerhouse trades on a forward price-to-earnings (P/E) ratio of just 7 times. 

Royston Wild own shares in DS Smith. 

AstraZeneca

What it does: AstraZeneca is a biopharmaceutical company that develops medicines used by millions of patients worldwide.

By Charlie Carman. AstraZeneca (LSE: AZN) has been a top FTSE 100 performer for a decade. An anticipated return to pre-Covid levels of cancer diagnostics should boost sales for the healthcare heavyweight’s range of oncology products, including Tagrisso, Lynparza, and Imfinzi.

Indeed, AstraZeneca is well positioned for an ongoing transformation in global demographics. Demand for pharmaceuticals to treat chronic diseases continues to rise, and the World Health Organisation predicts one in six people will be aged over 60 by 2030.

Disappointingly, the business suffered a recent setback in a trial for a nasal spray version of its Covid-19 vaccine. Initial testing revealed it didn’t provide adequate protection in humans. However, there’s more to the company’s drugs portfolio than coronavirus treatments, and I think growth prospects look bright elsewhere.

AstraZeneca’s share price has fallen nearly 15% since reaching a 52-week high in August. I believe this presents an attractive buying opportunity to increase the position in my shares.

Charlie Carman owns shares in AstraZeneca. 

Persimmon

What it does: Persimmon builds houses. And when prices are right, it builds up its land bank to build even more houses on.

By Alan Oscroft. The long-term argument for investing in Persimmon (LSE: PSN) is, I think, straightforward. The UK is in the grip of a chronic housing shortage. And our listed housebuilders enjoy strong barriers to entry.

The short-term argument against buying now is the economy, and the growing fears of house price weakness. After all, the Persimmon share price has fallen 50% over the past 12 months, and we don’t want any of that, do we?

Well, actually, I remember the previous housebuilder slump, and I noticed Persimmon was buying up building land when it was cheap. And after that, the shares entered a long and strong bull run. So what’s happening now? Persimmon has been buying up land again.

But the bottom line for me is a P/E ratio of only about five, and a 19% forecast dividend yield. The short-term risks are real, but I think Persimmon is oversold.

Alan Oscroft owns Persimmon shares.

Renishaw

What it does: Renishaw designs and manufactures high-precision measuring equipment and healthcare technology.

By Stephen Wright. I’ve gone for FTSE 250 stock Renishaw (LSE:RSW) as my best British shares to buy in November. This is a business that’s growing, is well protected, and has a strong balance sheet.

Renishaw makes specialist equipment, which it sells to various end markets, including agriculture, healthcare, and power generation. The company has over 1,800 patents protecting its products. 

The company’s balance sheet also looks sound to me. Renishaw has £16.25m in total debt and £141m in cash, which means that I don’t think it’s in much danger with interest rates rising.

Earnings have been growing at an average of 6% annually over the last decade. But the stock has fallen by almost 30% since the start of the year and is now trading at a P/E ratio of 21. 

Stephen Wright does not own shares in Renishaw.

Taylor Wimpey

What it does: Taylor Wimpey is one of the UK’s largest housebuilders, selling homes to private customers and local housing associations

By Paul Summers. The share prices of UK housebuilders have come under serious pressure in 2022 over concerns that rapidly rising interest rates and a protracted recession will dampen demand. Taylor Wimpey (LSE: TW) has been one of the biggest casualties, losing half its value since the beginning of the year.

This may be an opportunity for long-term-focused Fools like me. The FTSE 100 firm is clearly in far better financial health than it was during the Great Financial Crisis. And while dividends can’t be guaranteed, the 10% yield also looks more secure than the payouts on offer from Taylor Wimpey’s rivals. 

CEO Jennie Daly’s comments on the company’s outlook will be closely scrutinised when it releases a trading update early in November. With a P/E of just five, however, I suspect a lot of fear is already priced in. 

Paul Summers has no position in Taylor Wimpey.

Legal & General

What it does: Legal & General is a British multinational company that provides insurance, savings and investment products.

By Nathan Marks. I’m looking to Legal & General (LSE:LGEN) for my top British shares to buy for November. As one of the UK’s largest pension funds, it’s been grappling with the recent chaos in the bond market.

The Bank of England took emergency intervention in early October. That was to mitigate a material risk to the financial stability of the types of services that Legal & General provides. However, the company said that this episode had a “limited economic impact” on its businesses and still expected a full-year operating profit of 8%.

Market volatility could still worsen, causing further uncertainty in the company’s balance sheet and liquidity. However, the stock looks great all-round value and I think it’s been oversold. Today it trades at a P/E ratio of 6.8 and yields a very attractive 8.2% dividend.

It’s hard for me to ignore this strong business with historically robust demand for its products and services.

Nathan Marks has no position in Legal & General.

International Airlines Group

What it does: International Airlines Group is an Anglo-Spanish multinational group that is host to renowned airlines such as British Airways, Iberia, Aer Lingus, Level, and Vueling.

By John Choong. Despite a potential recession on the cards, travel demand still remains robust. As such, I think International Airlines Group (LSE:IAG) shares look lucrative at their current price.

In its most recent trading update, the firm disclosed that demand for travel remains strong and is still recovering to 2019 levels. There also seems to be an uptick in business and upper-class travel, which was echoed by its American competitors. CEOs are of the opinion that consumers are still spending despite inflationary pressures, just less on goods but more on services. Therefore, IAG is expected to benefit as the holiday season approaches.

Nonetheless, it’s worth noting that IAG’s high debt-to-equity ratio (107%) isn’t ideal in a high interest rate environment, and is something investors should definitely take note of. The group will have to hope that its free cash flow continues to remain robust through an economic slowdown in the medium term, or risks damaging its bottom line and sending its share price back down.

John Choong has no position in IAG.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Unsurprisingly, I have found the use of this type of ISA very appealing and consequently have looked for new shares to include. I tend to focus primarily on long-term investing, looking for good-value companies with strong fundamentals.

Compounding potential

Due to the typically longer duration nature of ISA-focused investments, I like to look for companies that pay a good dividend yield. I want companies that have paid this consistently for several years, along with growing it on an annual basis. The aim of this approach is that the beauty of compounding can take place within the ISA. This allows a significant return to accrue over the years.

The latest share I would consider including is Smurfit Kappa Group (LSE: SKG), a manufacturer of paper-based packing products. The company operates primarily in the UK and Europe, with separate packaging and paper business segments. Smurfit has experienced interesting share price movements over the last few years, rising 17.7% in 2020 and 18.1% in 2021.

Despite these share price gains, the company has struggled this year, falling almost 31% so far in 2022. As a result, the price-to-earnings (P/E) ratio has now fallen to 11.9 and is forecast to fall further to 8.2 by next year. This certainly creates appeal from a value perspective, in my view. The company is reaching a level that is a lot closer to typical value investments.

Underlying fundamentals

The underlying fundamentals are also attractive, with considerable forecast earnings growth, and decent profit margins. The company has achieved a reasonable level of earnings generation on invested capital, which is a key metric for assessing a company’s quality.

Furthermore, Smurfit has now recovered from a dip in turnover during 2020. The top-level earnings have now exceeded pre-pandemic levels, and are the highest on record. I think this consistent earning potential pre-pandemic, followed by a quick recovery in 2021, is a positive sign.

Consistent dividend yield

When looking for a company to include in my Stocks and Shares ISA, I want to find a fair dividend that has been paid consistently. This is certainly the case with Smurfit Kappa Group. The company is currently paying a yield of 3.9%, which is in line with the index average.

Furthermore, this dividend has been paid consistently for the last 11 years and has grown each year for the last 10. The yield is forecast to hit 4.4% next year, and is likely to continue growing. This is due to the aforementioned consistent earning generation which is essential for dividend payment.

Underlying weaknesses

The company does have slightly higher debt levels than I would like. Current levels are almost 45% of market capitalisation. Free cash flow generation has also fallen significantly, now just 40.6%. This is considerably below the company’s three-year average of 84.3%.

Nonetheless, I still believe that the company represents a good long-term investment opportunity. In my opinion, Smurfit is a high-quality company that is now trading at a discount. I would be keen to add this company to my Stocks and Shares ISA once I gather the funds.

Paper and packaging solutions

As an introduction, Smurfit Kappa is a leading paper and packaging solutions provider with a worldwide presence. It has over 355 production sites and operations in 35 countries throughout the world.

So what’s happening with Smurfit shares currently? Well, as I write, they’re trading for 2,440p. At this time last year, the stock was trading for 33% higher, at 3,684p. I believe macroeconomic headwinds and the tragic events in Ukraine have hampered the shares in recent months.

The investment case

Starting with the bear aspects of Smurfit, headwinds such as soaring inflation, the rising cost of materials, and volatility in the energy market are all playing a part in pushing down Smurfit shares. Rising costs is a credible threat as this means it costs more for Smurfit to manufacture and sell its products. A hike in prices could lead to its customers seeking alternatives. Profit margins are then put under pressure.

In addition to this, the current volatility in the energy sector, and a potential shortage of gas linked to the Ukraine war, led to Smurfit recently stating that a shortage of paper could become an issue. This could hinder performance and returns.

For the bull aspects of Smurfit, I’ll start with the current share price offering great value for money. On a price-to-earnings ratio of just nine, the shares look dirt-cheap. The FTSE 100 average is 15. For a global business with a long history of performance growth and returns, this looks attractive.

Next, Smurfit’s interim results for the half-year ended 30 June were positive. It reported that revenue increased by 36% compared to the same period last year. In addition to this, EBITDA grew by 50%, and it also increased its interim dividend by 8% to 31.6 cents per share. It seems to me the macroeconomic headwinds have not hampered it too much yet.

Finally, Smurfit shares would boost my passive income stream through dividends. At present, the dividend yield is an above index average of 4.35%. I am aware that dividends can be cancelled, however.

A FTSE 100 stock I like but will monitor

To summarise, Smurfit is at the mercy of current volatility. However, its most recent trading update does not show any ill-effects, in my opinion. It is a global business with enticing fundamentals, and great growth prospects linked to the e-commerce boom.

For now, I’ve decided that I want to see full-year results later in the year before I buy Smurfit shares. I will keep Smurfit on my watch list. I have a feeling that the second half of the year could present further challenges linked to recent headwinds. If it can overcome these successfully, which could be displayed in full-year results, I may change my stance.

Packaging business

As a quick reminder, Smurfit is a leading packaging firm and one of the largest paper-based packaging businesses in the world. Packaging demand has increased in recent times, especially since the pandemic, which coincided with the e-commerce boom.

So what’s the current state of play with Smurfit shares? Well, as I write, the shares are trading for 3,260p. At this time last year, the shares were trading for 3,750p, which is a 13% decline over a 12-month period.

I believe the stock market correction caused by geopolitical tensions and macroeconomic headwinds have driven down Smurfit shares in recent months.

A FTSE 100 stock with risks

Some of the aforementioned headwinds include soaring inflation and rising cost of raw materials. Some of these raw materials are vital cogs in Smurfit’s manufacturing process for its packaging products and solutions. The issue here is if it costs Smurfit more to produce, profit margins could be squeezed as well. If performance and profits are affected, investor returns and sentiment could be affected too.

The packaging market is very much a burgeoning one, due to the rise in demand led by the e-commerce boom mentioned earlier. There are other big competitors in this industry that will be vying for the same customers and business. One of these competitors is fellow FTSE 100 incumbent Mondi.

The bull case and my verdict

Let’s take a look at performance and fundamentals then. I do understand past performance is not a guarantee of the future, however. Looking back, I can see revenue has increased three out of the past four years between 2018 and 2021. 2020 levels dipped somewhat due to effects of the pandemic but 2021 results recovered strongly. The results were posted at the end of March for the period ending 31 December 2021. Smurfit reported growth in revenue, operating profit, and earnings per share as well as a dividend of 96.1 cents.

This leads me nicely on to my next point. Smurfit shares could boost my passive income stream. The shares currently hold a yield of 3.5%. This is pretty much in line with the FTSE 100 average of 3%-4%. It is worth noting that dividends can be cancelled, however.

What about the cost of Smurfit shares currently? Well, they look decent value for money to me at current levels. The market correction and headwinds have caused the shares to drop, and the shares are currently on a price-to-earnings ratio of 14. This is slightly lower than the FTSE 100 average of 15.

Overall I think Smurfit shares would be an excellent addition to my holdings. The shares currently look good value for money, pay a dividend to boost my passive income stream, and the business is continuing to grow performance and reputation as a world-leading packaging provider.

Smurfit Kappa’s share price dip 

Until now, that is. In the recent stock market correction, it dipped pretty dramatically. It lost almost half of its value in the span of a month. I can see why this has happened. The company had been warning of increasing cost inflation for a while now, including in its latest update. Yet going by its share price trends, investors appeared to be confident in the FTSE 100 growth stock. 

And then the war happened, which has made the inflationary threat even bigger. While many other FTSE 100 stocks have corrected too, this is probably most evident in those affected by commodity prices. So, it is no surprise really, that other packaging providers like Mondi and DS Smith have seen a significant fall as well. 

Case to buy the FTSE 100 growth stock

But as any investor who has been around for a while knows, the best time to buy high-quality stocks is exactly during such times. This is why I bought Smurfit Kappa and I am already glad I did. Just yesterday, it gained 8%. What is there to complain about? Especially now, when a lot of my other stock investments are looking pretty bad.

Moreover, I reckon its price could rise. One of the simplest ways to estimate this is by considering its market multiples. Its price-to-earnings (P/E) ratio has fallen below that for the FTSE 100 at 14x, making it a cheap stock whose price could potentially rise at least a shade, if not more. At 13.5x, its P/E is slightly higher than that for its FTSE 100 peers. But then its recent numbers are good too, which means that a higher P/E is probably justified. 

What happens next

I do think that these numbers could take a hit if the tragic Russia-Ukraine war continues because it means that prices will rise. And that could impact both its costs and its ability to pass them on, as consumers become more selective over time of what to buy as the real value of money declines. 

But I also believe that over the long term, its prospects look pretty good. One of the big-picture themes I have been tracking for some time now is the e-commerce ecosystem, which is really the future of shopping. 

Companies like Smurfit Kappa play a crucial role in its development, along with others like delivery company Royal Mail, warehousing real estate investment trusts like Segro and of course e-commerce marketplaces like Amazon. I think over the next 10 years, this segment is likely to grow by leaps and bounds, which is why I have bought Smurfit Kappa and will hold it for a long time. 

Unilever: FTSE 100 consumer goods giant

Unilever (LSE: ULVR) has had a really poor past year at the stock markets. Its stock price has performed miserably and when I look at its price chart, its trend line is flat. The pandemic of course impacted it and more recently, I reckon that rising inflation could be making investors jittery about it. At the same time, I just cannot overlook its solid performance.

In 2021, its underlying sales growth was the fastest in nine years and its earnings rose too. It also has positive expectations for this year. Its earnings could be impacted by “very high input cost inflation” as it says in its latest update, but it expects things to get better in the second half of the year. And as a big consumer goods company, I think it will continue to perform over the next years as well. I have not bought the stock, but I think 2022 is the year I will. 

Smurfit Kappa Group: FTSE 100 growth stock

In direct contrast to Unilever is the packaging provider Smurfit Kappa Group (LSE: SKG), whose share price has doubled in less than five years, before falling back a bit. Even now, it has come a long way from 2017, though! It was a high performer even before the pandemic, but Covid-19 might just have been the big turning point for it. As lockdowns necessitated e-commerce, we all know by now how the sector boomed. And Smurfit Kappa grew with it too. This year might be a bit tricky for it, considering that it is impacted by high cost inflation too. But, a dip might just be a good time to buy this promising stock that I have long regretted not buying earlier. 

Segro: warehousing biggie

If Smurfit Kappa’s performance is solid, Segro (LSE: SGRO) is even better. Its share price has almost tripled over the past five years. And I think it is quite likely that the best is yet to come. Segro also benefits from the strong surge in online shopping and it is expanding fast as a result. As a real estate investment trust (REIT), it is a bit of a challenge to compare its market valuation with non-finance stocks, but if I do consider its price-to-earnings ratio, it does look incredibly cheap at 3.6 times. There is always the possibility that the company’s growth could slow down when we are finally past the pandemic. But I reckon that would only be a relatively short-term correction. And here I am talking of stocks that I can buy and hold for the next decade. It is one stock I will definitely buy this year.  

Relatively cheap FTSE 100 stock

This only adds to its good financial performance in the past. It is little wonder then that in the past five years, the stock has almost doubled. And going by its relative price, I reckon it could rise even further. It has a price-to-earnings (P/E) ratio of 19 times, which is just north of the FTSE 100 P/E of 17 times. I expect that this gap could widen over time though, going by Smurfit Kappa’s prospects. 

Structural shifts in its favour

As an e-commerce stock, it might have been helped by the recent spurt in online shopping. But I do not believe that it was a one-off increase, but has in fact accelerated a structural shift in its favour. Moreover, as the economy continues to recover, consumer spending is quite likely to keep rising. Just today, numbers for the UK economy were encouraging. Growth for 2021 came in at 7.5%, a bounce back after the slump we saw in 2020. 

Inflation is a stumbling block

Of course inflation could play spoil sport, holding back consumers’ ability to buy more as everything becomes more expensive. The company has also mentioned “unprecedented cost inflation” in its update, which reflects that high prices could hurt int two ways. But over the long term, say 10 years, inflationary trends are likely to even out. And that is the kind of holding period I have in mind for buying the stock.

As I see it, the e-commerce sector can show a whole lot of growth in the next few year and stocks like this one will only gain because of a boom in online spending. This is especially so because it is geographically diversified. This means that even if some of the more developed markets become saturated over time, it can potentially continue to find new pockets of growth. 

Analysts are bullish

Interestingly, just to see if my opinion is shared by others, I checked on the forecasts for the stock. Turns out that all five analysts whose share price targets have been compiled by the Financial Times expect its price to rise in the next 12 months. The rise isn’t expected to be anything spectacular. The most optimistic see it at 13%, but that is not too bad, I believe. And if continued, could result in some pretty decent gains over the years. 

These forecasts could change if the circumstances change, of course. But for now, I see a very good chance that Smurfit Kappa’s stock will continue to do well. I have already waited for too long to buy it, and now I think it is finally time to do so. 

Market leader

Smurfit Kappa is Europe’s leading corrugated packaging company and one of the leading paper-based packaging firms on the planet. Packaging in all forms has been a staple for all industries for many years but in recent times there has been an e-commerce boom and the pandemic has exacerbated this too. Due to this, demand has increased. Firms like Smurfit are primed to benefit.

As I write, shares in Smurfit are trading for 4,025p whereas a year ago shares were trading for 3,374p. This represents a 19% return over a 12-month period. It is worth noting that shares have comfortably surpassed pre-pandemic levels too.

Why I like Smurfit Kappa

Smurfit’s profile, offering, and reach are excellent. It is a world leader in its market and has a vast reach. It has 36 factories producing its packaging materials in countries across the world. In fact, it recently announced a new plant in Mexico. The Latin market could be key for it to continue growing, which could lead to increased performance and better returns. At current levels it looks attractively priced too. It sports a price-to-earnings ratio of 19. The FTSE 100 average is 20.

Next, Smurfit has a good track record of performance too. I understand the past is not a guarantee of the future however I like to use it as a gauge nevertheless. I can see revenue and gross profit increased year on year for three years prior to 2020, when levels dropped slightly due to the pandemic. Coming up to date, a trading statement in November for the first nine months of the year made for good reading too. Revenue increased by 15% compared to the same period last year. Overall, forecast full-year results are on target to be met.

Finally, the rise in environmental, social, and corporate governance (ESG) investing has shone a light on firms like Smurfit. It looks to adopt ESG practices and keep its business socially and environmentally friendly. This is a bonus for me personally as ESG investing is not high on my list of priorities. However, it is good to see Smurfit adopting practices in its operations such as recycling old materials and being environmentally friendly.

FTSE 100 stocks have risks too

Smurfit could experience performance issues due to the current macroeconomic pressures. Rising inflation and costs could hurt performance and any investor returns too. Costs passed on to customers could lead towards its customer turning to competitors, although they face similar headwinds too. Furthermore, the packaging market is competitive. Other FTSE 100 players include DS Smith and Mondi.

Despite the risks noted, I like Smurfit Kappa and would add the shares to my holdings at current levels. I believe it is currently attractively priced and performance seems to be on the up. Furthermore, it pays a dividend, which would make me a passive income.

FTSE 100 blue-chip shares to buy

The first company on my list is the insurance giant Aviva (LSE: AV). Over the past five years, the organisation has been pushing ahead with a transformation plan that has seen it divest most of its international businesses. In total, eight divisions have been sold for £7.5bn. Cash received from the sales has been used to repay debt and reinvest back into the UK business. 

Traditionally a retirement saving and life insurance provider, Aviva is now focusing on expanding its general insurance business.

General insurance includes so-called short-tail insurance policies, which last only a year or more, unlike life insurance policies which can last for decades. 

By using this strategy, the group should be able to generate higher profits while freeing up capital. Regulators require insurers with long policies to hold more capital against these liabilities, as the longer the policy, the more that can go wrong. As shorter policies are more predictable, companies have more flexibility. 

As well as divesting international businesses and refocusing the business model, management is also looking to cut £300m of costs. This should help improve profit margins and the amount of cash available for distribution to investors. 

It should also provide capital for the company to use to market its asset management platform, another key area of growth for management. 

Cash returns 

Asset management and short-tail insurance exposure could help the group’s growth, but these are incredibly competitive markets. Aviva cannot take its growth for granted in these markets, considering the size and scale of some of its competitors. Fending off competition is probably the biggest challenge the company will face as we advance.

Still, Aviva is transforming into a more focused financial services group by channeling its efforts into profitable, predictable products.

These efforts are already yielding results for investors. Management thinks the company can return £4bn of cash to investors from asset sales and the dividend.

At present, the stock supports a dividend yield of 5.5%. What’s more, despite the company’s transformation progress, the shares are trading at a forward price-to-earnings (P/E) multiple of just 8.7. 

Based on these metrics, and the company’s growth potential, I would buy the FTSE 100 stock for my portfolio today. 

FTSE 100 growth opportunity

The e-commerce market in the UK is booming, but an often overlooked part of this market is the infrastructure required to deliver packages on demand. 

When I say infrastructure, I mean the cardboard and paper packaging required for every delivery. Supplying these products is big business, but it is also a commodity business with low-profit margins. 

Economies of scale are required for success, which is the advantage available to Smurfit Kappa (LSE: SKG). Over the past decade, this paper and packaging group has been able to capitalise on the expanding e-commerce market. By focusing on efficiency and scale, the organisation has increased its operating profit margin from 8.9% to around 10.4% over the past five years. 

Further growth seems likely as analysts believe revenues could increase by around €2bn (£1.7bn), or 24%, over the next two years. It looks as if the firm is on track to hit this target. Revenues for the nine months to the end of September increased 15% year-on-year. 

Smurfit’s main competitive advantage is the company’s scale. It is the only large pan-regional player in Latin America and has over 350 production sites in 36 countries. 

Supply chain disruption 

Unfortunately, like other sectors, Smurfit is encountering some supply chain disruption. However, the company is offsetting some of this disruption by increasing prices, which it seems customers are only too willing to take.

Another advantage the group has over competitors is the fact that its products are 100% renewable and produced sustainably. I think this will become an increasingly important point for customers as we advance. It is yet another reason why I believe this business deserves a place in my portfolio.

I would buy the stock as a way to invest in the booming e-commerce industry. With a forward P/E of 14.9 and a dividend yield of 2.7%, I think the stock appears cheap. 

Some challenges the business may face going forward include competition. As noted above, the market is incredibly competitive. Rising costs may also cause challenges if Smurfit cannot pass more of these on to consumers. And if there is a significant shift away from thrown-away packing due to recycling concerns, the group may be ill-prepared to deal with this change. 

Value retail

The final company I would buy for my portfolio of FTSE 100 stocks with growth potential is B&M European Value Retail (LSE: BME).

Research shows that consumers tend to switch down to cheaper own-brand and value products in periods of high inflation. With the Bank of England expecting inflation to hit around 5% in the near term, it looks as if value retailers such as B&M may experience an increase in demand. 

Of course, there is no guarantee this will happen. Economic theories are just that, theories. If wages also increase in line with inflation, consumers will have no need to shop around for cheaper products. The UK retail industry is also incredibly competitive, and retailers may decide to fight back with lower prices themselves. 

Nevertheless, I would buy B&M because I have been impressed with this company’s growth over the past decade. It has more than doubled revenues since 2016 by focusing on consumers’ preference for value. And as the business has grown, so has its buying power, which allows management to achieve better deals for consumers. 

Even though the stock looks relatively expensive, trading at a forward P/E of 16.6, I think the shares are worth buying, considering the company’s potential. They also offer a dividend yield of 3.4%, which looks attractive in the current interest rate environment.

Bull versus bear

The bull argument appears to run along the lines that the stock looks cheap against the usual valuation measures. And the dividend yield is high. What’s more, it’s a well-established stalwart of the UK’s lead index and one of the country’s largest public blue-chip businesses.

And on top of all that, the interest environment has been low for years, but rates appear to be on the rise. And banks can do well when interest rates are higher. Also, banks tend to thrive when the economy prospers.

So with the pandemic beginning to lose its grip, we could see brighter economic times ahead. And that would be ideal for helping the Lloyds business to grow.

However, I find the bear argument to be more compelling. And, for me, it starts with the observation that Lloyds operates a highly cyclical business. It’s super-sensitive to changes in the economic outlook and to investor sentiment. Profits, dividends and the share price tend to cycle up and down over the months and years with depressing regularity. And periods of high earnings often lead to lower earnings around the corner. So when earnings have been high for some time, there’s often a lot of risk to the downside for the stock.

And that last point is what worries me the most because earnings have indeed been high since around 2016. But in that assessment, I’m ignoring the temporary effects of the pandemic. On top of that, I’m discounting the bull case for the stock being attractive because of a low valuation. To me, ultra-cyclical companies are ‘supposed’ to have a low valuation when they appear to be near the top of their earnings cycles.

A strong UK stock

So, on balance, I’m ignoring Lloyds Banking Group and see more attractive investment opportunities elsewhere, such as with Smurfit Kappa (LSE: SKG). The company operates as a paper-based packaging maker. And it’s been investing for growth while riding a tsunami of demand. And that’s being driven by the e-commerce sector and a shift in the market to paper-based packaging for sustainability.

City analysts are upbeat about the prospects of the business. They’ve pencilled in double-digit percentage increases for earnings this year and in 2022. And chief executive Tony Smurfit said in July: “We are accelerating our investment plans to capitalise on the significant growth opportunities available to us.”

Yet, despite the firm’s progress, the share price has weakened recently. It’s true that the operation has been facing rising input costs because prices for many things have been going up. But Smurfit Kappa has been good at raising its selling prices to preserve profit margins.

Meanwhile, with the share price near 3,921p, the forward-looking earnings multiple is just over 14 for 2022. And the anticipated dividend yield is around 2.8%. That’s not a bargain valuation and the stock price could slide lower if the company fails to meet its earnings estimates.

Nevertheless, I’m tempted to buy a few shares of Smurfit Kappa because the business looks strong to me.