I’m searching for the best FTSE 100 stocks to buy for my shares portfolio right now. These two blue-chip stocks have provided brilliant shareholder returns in previous years. Here’s why I’m confident they will continue to make investors sparkling profits too.
A FTSE 100 share I already own
Ashtead Group (LSE: AHT) was the best-performing FTSE 100 stock of the 2010s. Its return on investment over the decade soared at a compound annual growth rate of 43%, according to Refinitiv. I might have been late to the party, but the rental equipment provider has been a happy buy for me too. Since I bought it in September 2019, the share price has soared 173%.
Ashtead has been on a mission over the past decade to build its market share in the US. It’s a programme that has yielded brilliant results and driven its share price to the stars. The company’s Sunbelt division now commands an 11% share of the market, more than double what it was 10 years ago.
Its revenues have more than quadrupled during that time. And, pleasingly, the company’s exceptional cash flows mean that it can continue on its lucrative path of profits-charging acquisitions.
Demand for Ashtead’s rental equipment could slump if economic conditions worsen and the construction sector wilts. However, I think this particular share has shown time and again it has the ability to navigate choppy waters. While past performance is no guarantee of future success, this provides me as an investor with supreme confidence.
City analysts think annual earnings here will rise 30% this fiscal year (to April 2022). This leaves it trading on a forward price-to-earnings growth (PEG) ratio of 1. I think this represents great value given Ashtead’s terrific track record.
A renewable energy stock I’d buy
Conversely, SSE (LSE: SSE) is a FTSE 100 share that commands a fatty paper valuation. At current prices, the power generator trades on a forward price-to-earnings (P/E) ratio of above 19 times. It’s my opinion though that such a premium is fully merited.
Its high price reflects the peace of mind that its ultra-defensive operations give investors like me. Furthermore, its focus on renewable energy might supercharge demand for its shares. And that could lead to subsequently significant share price appreciation as responsible investing becomes more popular.
It’s important to remember too that SSE’s mighty 5%-plus dividend yields help take the sting out of its elevated earnings multiple.
SSE had some good news last week. It recorded a victory against Ofgem last week over an argument on price controls. But the news is a reminder that the threat from regulators to operators (and their profits) is considerable. This is something that investors need to be aware of.
Still, I think the essential nature of its services — and the knowledge that its earnings remain stable during economic downturns as well as upturns — helps to balance this out. I think SSE is a top-quality renewable energy stock for me to buy right now.
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Royston Wild owns shares of Ashtead Group. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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