Could FTSE 100 shares be a bargain even after the index hit a up-to-date record high?

Image source: Getty Images

Last week was a landmark week for the London Stock Exchange, with a banner one FTSE 100 Blue-Chip Stock Index Hits New All-Time High.

That said, some FTSE shares still look like a potential bargain to me.

How can this be?

The forest is not the same as the trees

Imagine the FTSE 100 as 100 trees planted in a field.

Forest canopy heights may be higher than ever before – but that doesn’t mean all the trees in the cluster are taller than ever. Some may have shrunk, but this is obscured by the taller trees as he looks at the forest from a distance.

In the same way, despite the recent FTSE 100 High Point, some members of the prestigious index have essentially trailed over the past year, while others have sunk significantly.

As an example of this second category we have Related British Foods (LSE: ABF).

Its share price has lost 19% over the past year as part of a decline of 29% over five years.

This means the company now offers a dividend yield of 3.3% and trades at a price-to-earnings ratio of just under 10.

But I believe that the company has strengths that the price does not suggest. It owns many well-known and long-established food brands, such as Twins AND Ryvita. Such brands give the company pricing power, something that can aid maintain profit margins.

Despite its name, ABF is not just a food business. He also owns a discount clothing retailer Primark. Its success in the British Isles has set a template that ABF hopes will translate into up-to-date regions as it expands into various international markets.

But given these strengths, why has the FTSE 100 share fallen so much?

Last week’s trading statement painted a picture of a business moving sideways, with revenues over the last sixteen weeks down 2.2% (excluding currency movements, up – but only 0.5%).

The UK and Ireland continue to experience challenging market conditions. During the ABF agriculture division review period, demand for composite feed is still supple in both China and the UK. I see mighty risks that will continue to persist in the first half of this year.

Taking a long-term approach to investing

But to me, these risks seem like part of the ups and downs of running a diversified international business like ABF.

Long-term approach to investing. In the longer term, I think the value of ABF’s brands and business is not fully captured in the FTSE 100 share price.

So I see it as a share that investors should consider right now.