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Having fully recovered from its tariff-related tumble, the FTSE 100 is now showing a solid-if-unspectacular gain of almost 6% for the year to date. But I think some stocks within the index have the potential to deliver far bigger profits in time.
Is the worst over?
To say that JD Sports Fashion (LSE: JD) is enduring a sticky patch is putting it mildly. We’re talking about a company that, thanks to slowing sales and profit warnings, experienced a near 35% decline in value from January to April.
As shockingly bad as recent form has been, I wonder if the tide might now be turning. The share price is up almost 10% in one month after better-than-anticipated numbers from key brand Nike.
Saying that we’ve already seen the bottom might be premature if inflation keeps rising. But assuming this doesn’t happen — and Nike continues to show that it’s getting its mojo back — JD Sports’ current price-to-earnings (P/E) ratio of eight could prove to be a steal, in time.
I also suspect the hot weather over recent weeks — and people’s need for suitable clothing — bodes well for the next trading update, due mid-August.
Quality stock going cheap
Distributor Bunzl (LSE: BNZL) is a second top-tier titan with a stock that has tanked. The most significant drop came in April. Back then, management cut full-year guidance due to slower performance in North America.
Aside from a brief rally in early May, the share price hasn’t really budged since. Last month’s trading update didn’t contain any fresh nasties but nor did it seem to put investors at ease. Indeed, there could be fresh pain on the way if management’s hope for a better performance over the second half of the year proves misplaced.
Still, the stock can now be snapped up for slightly under 14 times forecast FY25 earnings. That’s lower than the company’s average P/E of 19 over the last five years.
This is also a company that’s vastly outperformed the index over the long term. Taking this and the essential (but rather dull) service it provides into account, I’d say Bunzl is worthy of closer inspection.
Long-term bet
Rounding of my list of big stocks to consider in July is Rio Tinto (LSE: RIO). While it hasn’t fared quite as badly as the other two market juggernauts mentioned here, the miner’s value has dipped by 9% in 2025.
Considering all the uncertainty over tariffs, this isn’t exactly surprising. But news that CEO Jakob Stausholm will be stepping down after falling out with the board over his reluctance to cut costs hasn’t helped matters.
Management shake-ups are, of course, inevitable. But the market probably won’t relax until a replacement is announced.
On a positive note, the 6.2% dividend yield is far more than that offered by most FTSE 100 firms. A P/E of 9 also looks very reasonable if the expected surge in demand for the stuff Rio digs up comes to pass as the world gradually moves to cleaner forms of energy.
Of course, a chunky dividend and lower-than-average valuation won’t be much compensation if the share price continues to slide. So, a healthy dollop of diversification remains a good idea.
