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I'm sure everyone has different ideas about what the best stocks to buy are for their ideal set of investments.
For me personally, B&M European Value (LSE: BME) and National Network (LSE:NG.) are two options that I believe could help me generate wealth.
This is why I would love to buy them next time I have spare funds.
Discounted consumer goods
The value retail segment has seen explosive growth in recent years, and B&M has been at the forefront of this. FTSE 100 Index The current incumbent has experienced exceptional growth in terms of performance, profits and presence. To put this into context, sales have increased by almost 170% over the past eight years.
In recent times, the cost of living crisis brought on by rising inflation and higher interest rates has helped the company reach new heights. This is because consumers are looking for more for their money. B&M has taken advantage of this to increase its presence, with the acquisition of the now defunct Wilko facility providing an example of how the company has capitalised.
Interestingly, B&M shares have recently fallen, due to what I believe to be an overreaction. The June annual report confirmed that operating profit rose by 10.9% compared to the previous year. In addition, comparable revenues in its core UK business rose by almost 4%. However, the company did not disclose much information about its outlook for the coming year.
B&M continues to expand aggressively and is targeting 1,200 stores, up from its current 755 stores. However, the threat of competition from supermarkets striving to maximise their own core product ranges to reach the pocket-conscious consumer could impact profits and returns.
Looking at the fundamentals, B&M's falling stock has offered a good entry point at present, as it is trading on a price-to-earnings ratio of just 12. Furthermore, the dividend yield of 3.2% could rise in the future. However, I understand that dividends are never guaranteed.
Keeping the lights on
National Grid is responsible for ensuring that we all have the energy we need.
The appeal of buying National Grid stock is that it is the only option available, as there are no competitors. This ensures that profits remain fairly stable. In addition, the stock possesses defensive characteristics, as everyone needs energy despite the economic outlook.
It is worth noting that National Grid has long been a dividend aristocrat. Its current dividend yield stands at just under 6%. However, a recent instance of dividends never being guaranteed hurt the stock. The company said it needed to cut the dividend to balance the books, as well as invest in infrastructure. In addition, it needs to prepare for green energy alternatives. This is also a risk going forward. However, I believe that once the company has invested the necessary funds, the rewards will outweigh the inconvenience of cutting the dividend.
The good news is that National Grid's share price decline means it's cheaper for me to buy it. It's trading on a price-to-earnings ratio of just 10.
As with all investments, there are ups and downs. I view the dividend reduction as a temporary, short-term measure. Over the long term, I believe the rewards from this strategy could help build wealth.
