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Some investors have been growing increasingly nervous about the stock market. It may be easy to point to that as a result of the performance of a handful of tech stocks in the US market. But while the London market is on a less stretching valuation, that does not mean it is necessarily cheap.
The FTSE 100 index of leading UK blue-chip shares has repeatedly hit new highs so far in 2025, after all — including this week. So against that backdrop, could the FTSE 100 still potentially present an investor with opportunities?
Taking a long-term approach
I think the answer is yes. Just because a market hits a record high does not necessarily mean that it is overvalued (or undervalued). Not only that, but the current price is just a snapshot. It can be easy to pay too much attention to it, rather than asking what I think is a more useful question.
That question is, as an investor, am I able to buy a stake in a brilliant business (or businesses) today for markedly less than I think they will be worth over the long term?
Taking that approach, even if I bought a share now and its price then went down, it would not necessarily bother me. Instead, I would focus on the fact that in the long term its value (in my opinion) ought to be higher than it is.
Patience is helpful in that scenario, of course. If it was a dividend share, I may even be paid to wait!
Hunting for bargains today
So are there any FTSE 100 shares that might still be the sort of share I describe above? I think so. After all, the index contains 100 different shares. Whether it is riding high like now, or not, some of those individual shares could likely be bargains – and others may not.
One FTSE 100 share I think investors should consider at the moment is brewer and distiller Diageo (LSE: DGE). The index’s strong performance this year (up 15%) is no thanks to Diageo, a share that has fallen 29% so far in 2025.
There could be good reasons for that. Diageo has been battling short-term challenges in terms of weak demand in Latin America and elsewhere. It is fighting a medium-term challenge, of a sluggish economy hurting tipplers’ enthusiasm for premium-priced spirits. It is also grappling with the long-term trend of fewer younger consumers drinking alcohol.
Given all that, it is easy to see why some investors have cooled on Diageo, despite its massive profits and decades-long streak of annual increases in its dividend per share.
I think the stock market reaction may have been overdone though. Diageo has expanded into non-alcoholic beverages. That defensive move only excites me marginally as an investor. What I think remains the big opportunity is booze.
The FTSE 100 company knows how to make it and market it. Its portfolio of premium brands and unique production facilities such as storied distilleries gives it pricing power.
