The FTSE 100 index began on 3 January 1984 with a value of 1,000. Since then, it’s doubled three times — in 1987, 1997 and 2024.
With the index near 8,205, can it double again? Although positive outcomes aren’t guaranteed, I think it’s likely, and here’s why.
Rising prices, long-term rising index
Over years, inflation keeps a steady upwards pressure on the index. When prices rise, businesses tend to increase their revenues, cash flows and earnings.
On top of that, companies often grow their businesses and increase their earnings because of operational progress. That process can also boost the index.
Businesses that fail to grow often slip out of the Footsie to be replaced by better enterprises with promising growth prospects. In that sense, the index tends to be self-renewing with a tendency to lean towards growth.
For investors taking a very long-term approach, there’s a case for putting money into low-cost, mechanically-managed index tracker funds.
I’d target the FTSE 100, FTSE 250 and America’s S&P 500 indices as a starting point. But there are many other tempting trackers to choose between too.
However, within the Footsie, individual companies often outperform. For example, Rolls-Royce Holdings and Marks and Spencer most recently. So I’d also try to find some of those opportunities and invest in their shares alongside my tracker positions.
One FTSE 100 company I’m keen on right now is Mondi (LSE: MNDI), the packaging and paper solutions manufacturer.
After weaker earnings in 2023 and 2024, City analysts expect a strong bounce-back next year. But one of the risks is the business can be cyclical and vulnerable to the ups and downs of the economy.
Value in the sector
The past few years have been difficult for firm’s like Mondi because of all the well-reported general challenges for businesses. However, the underlying trends of internet shopping and ditching plastic packaging are supportive for the firm longer term.
There’s competition in the sector, and that’s an ongoing risk. But suppressed valuations have led to take-overs and consolidation in the industry lately. For example, with Smurfit Kappa, which is now Smurfit Westrock after merging with Atlanta, Georgia-based WestRock this month (July).
In another deal, DS Smith agreed in April to be taken over by Tennessee-based International Paper and that process is ongoing.
I think all this corporate action suggests there’s value in the sector. Back in May, Mondi updated the market about first-quarter trading. Chief executive Andrew King said demand in the firm’s markets had been improving during January, February and March.
The order book’s been getting stronger and higher sales volumes have been coming through.
However, Mondi started 2024 with lower selling prices compared to the prior year. Nevertheless, King said the business is well positioned to benefit if trading conditions and demand continue to improve.
We’ll find out how well the second-quarter went with the half-year results due on 1 August.
Meanwhile, with the share price near 1,564p, the forward-looking price-to-earnings rating is just over 12 for 2025 and the anticipated dividend yield is around 4%.
I think that’s an undemanding valuation and would be keen to dig in with further research now. My aim would be to pick up a few of the shares to hold long term.
This post was originally published on Motley Fool
