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On August 30th, the London Stock Exchange Index (FTSE) 100 briefly broke the 8,400 barrier to come distressingly close to its all-time high of 8,475.
The rise has been largely driven by the prospect of future interest rate cuts. With cheaper borrowing comes more avenues for growth. And as rates (hopefully) fall over the next few years, we will (hopefully) see the Footsie rise and rise, perhaps hitting that magic 10,000 mark sooner rather than later.
If the Footsie hits five figures, many of the companies within it could look like very good investments. So let's look at four key companies that I'm considering buying next time I have some extra cash.
Big money
As the FTSE 100 is a weighted index, we will first need to look at the largest companies. And when it comes to large companies, Shell and blood pressure It won't be far from people's lips. Oil is big business, no surprise there, but most people still underestimate how big these companies are.
The average revenue of a Footsie company is $7 billion. That's a lot of money, isn't it? Well, not really.
At least not when compared to BP's gross revenues of $202 billion last year and Shell's of $293 billion. Both energy companies generate incredible amounts of money and that gives them a huge impact on the performance of the FTSE 100 index.
Of course, big sales do not guarantee growth. Growth for the oil majors depends on other factors. The price of oil is one of them, and worsening geopolitical tensions will probably push it up.
Another issue is net-zero emissions obligations. CEOs of both companies have made statements over the past year about the need to focus on pragmatism rather than idealism. “We’re going to need oil for a while,” is the general message. It’s a contentious issue, but I don’t see any reason why oil shouldn’t grow in the coming years.
Another beast from the Footsie brand is AstraZeneca (LSE: AZN). The pharmaceutical company is currently the largest firm in the index by market value, even larger than Shell, despite recording a fraction of the oil major's revenue or profit.
Unlike some of its Footsie peers, AstraZeneca is primed for growth and has a cornucopia of new drugs and treatments in development. This promising future doesn’t come cheap, with its shares trading at a dizzying 40 times earnings.
One to keep in mind
Can you justify a valuation that is roughly on par with the hyped artificial intelligence? NvidiaWe'll see. But as the pharmaceutical giant accounts for a 13% weighting of the FTSE 100, it will likely play a very important role in whether the index breaks 10,000 points in the near future.
Speaking of Nvidia, Big tech and the impact of ai have also pushed US stocks close to all-time highs. While the FTSE 100 is not home to an Nvidia or a AlphabetThere is room for companies that can use ai on a smaller scale.
One of them is Relax which offers products to doctors and lawyers to help them make sense of dense, inscrutable information. The firm has grown so much that it has overtaken Diageo and British American Tobacco and is now the eighth largest firm by market value. Another one to watch, if you ask me.
