5 things to look for when choosing FTSE 100 shares to buy

As an investor, I like to invest in companies with proven business models. So it might look like this FTSE100 Index forms a natural hunting ground thanks to many large and well-established businesses.

But even within the FTSE 100, some stocks perform very well and others perform poorly.

Here are a few things I looked out for when researching the FTSE 100 to buy.

1. Focus on the future

Companies rise to the leading index due to the size of their market capitalization. In a sense, this could make the index quite backward-looking. Fast-growing sectors of the economy may not be represented, while mature industries in decline may still be represented.

Let’s take tobacco as an example.

Maybe British American Tobacco and rival Imperial Brands Remnants of a bygone era? Both saw revenue declines last year despite having strong pricing power.

2. Sustainability of the business model

National Grill It is a popular choice among income investors thanks to its high dividend rate and policy that aims to increase the dividend in line with inflation.

However, the shares do not belong to me. From where? I think the business model is less lucrative than it seems. It may take more money to maintain this.

Yes, energy distribution networks are probably here for the long term. However, maintaining or replacing them is a highly capital-intensive task. This helps explain why National Grid has been diluting shareholders this year to raise cash.

3. Buy the work, not the gossip

FTSE 100 firms, which are nationally recognized companies, frequently appear in takeover rumours. Buying a business that is later taken over can mean a quick profit.

But this is how I see it Speculation not investment. I only invest in a stock because I like its business prospects and current valuation.

4. Always pay attention to valuation

I think valuation is important when buying any stock and this also applies to FSTE 100.

Take into account spiral (LSE:SPX), the engineering company has an unbroken record of annual dividends per share rising for more than half a century.

Business performance hasn’t been great lately. While revenues reached an all-time high last year, underlying earnings per share fell 18%. I see further risk for the steam and industrial fluid system specialist due to continued demand weakness in China.

But I still see it as a great company and would be happy to own shares. It has a sizeable addressable market, proprietary technology, a large installed customer base and a strong reputation.

But is the FTSE 100 share, which has fallen 36% so far this year, worth more than that figure? 20x earnings?

I don’t think so, so I’m not buying it.

5. Think about what makes the company different

As with any stock, I look for a competitive advantage that I think will help differentiate a company from its competitors.

FTSE 100 companies like it haleon And Unilever’s They have portfolios of unique brands that give them pricing power.

billionaire investor Warren Buffetwho tried to buy the entirety of Unilever in 2017, is always looking for a job to own “”.ditch” this helps him fend off his opponents.