Why I’d buy these 2 rising FTSE 100 shares

British American Tobacco cigarette making equipment

While the FTSE 100’s price level has risen significantly in recent months, it could move higher. A weaker pound has already had a positive impact on the index since the election. Looking ahead, a further depreciation could cause the index to move higher. Against this backdrop, buying large-cap shares could prove to be a shrewd move. Here are two stocks which have delivered stunning growth in the first half of the year, and could continue to do so over the medium term.

Resilient growth

Reporting on Wednesday was British American Tobacco (LSE: BATS). Its results for the first half of the year show it is making encouraging progress with its current strategy. Although volumes are expected to decline for the full year, they are set to be below the volume decline of the wider tobacco industry. The main reason for this is the strength of the company’s brands, and the customer loyalty which they enjoy. The Global Drive Brands have continued to deliver profit growth, although the company expects the bulk of profit growth to be weighted towards the second half of the year.

Looking ahead, British American Tobacco could become a more popular stock. The main reason for this is the resilient growth potential which it offers. Sales of tobacco products will not be affected by a change in government, nor will Brexit harm the company’s outlook. Therefore, its defensive qualities could cause investor sentiment to improve at a time when risks appear to be on the increase for UK investors.

Alongside this defensive business model is an improving growth outlook. The company’s investment into reduced risk products such as e-cigarettes may be hurting its cash flow, but it could provide a new avenue for growth over the medium term. While the company’s shares have already risen by 18% since the start of the year, more capital growth could lie ahead.

Growth potential

Also offering further upside potential after a strong first half of the year is speciality chemicals company Croda (LSE: CRDA). Its shares have risen by 24% since the start of the year, but do not yet appear to have fully factored-in the company’s growth potential.

For example, in the current year the business is expected to record a rise in its earnings of 28%. This is around four times the forecast growth rate of the FTSE 100, and yet Croda trades on a price-to-earnings growth (PEG) ratio of only 0.8. This suggests that it offers growth at a reasonable price. At a time when the FTSE 100 is trading at a record high, this could lead to improving investor sentiment.

In addition, Croda offers an improving income outlook. It may only yield 2.1% at the present time, but dividends are due to rise by 8.6% next year. This is well ahead of an inflation rate which could continue to rise. And with the company having a dividend coverage ratio of 2.1, further dividend growth could lie ahead over the medium term.

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Peter Stephens owns shares of British American Tobacco. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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