One FTSE 100 stock I’d buy ahead of a bull run!

Current market volatility has adversely impacted many FTSE 100 stocks. Despite this, I believe an eventual bull run could be around the corner. With that in mind, one stock I like the look of is Associated British Foods (LSE: ABF). Here’s why.

FTSE 100 stocks struggle but could rebound

Macroeconomic and geopolitical events have hampered global markets. Soaring inflation and rising interest rates throughout the world have pushed down many shares. In addition to this, here in the UK, a cost-of-living crisis has weakened the economic outlook. Furthermore, the war in Ukraine has also made matters worse.

I believe there are signs that an eventual bull run could occur. This is because inflation is falling, albeit gradually. It has decreased from over 10% to just under 8% in the most recent figures published by the government. Next, City analysts reckon next year could see dividends hit close to record pre-pandemic levels. I’m braced for short-term pain, but hopefully longer-term gain.

The bull case

If a bull run were to occur, I’d buy Associated British Food shares now, if I had the spare cash to invest.

Firstly, Associated has a diverse set of operations. Perhaps best known for its food production businesses and strong brands, it also owns Primark, the popular budget clothing retailer. Food is an essential staple, no matter the economic outlook, which means Associated has some defensive traits, in my opinion. Furthermore, Primark is a popular choice for consumers who are looking to stretch their budgets further.

Next, Associated shares are on a good run. As I write, they are trading for 1,977p. At this time last year, they were trading for 1,577p, which is a 25% increase over a 12-month period. I’m hard pressed to find many FTSE 100 stocks experiencing similar share price growth given the market’s volatility.

From a growth perspective, Primark looks like it could be the arm of the business to propel Associated’s earnings and returns to new heights. Store presence is growing and it is targeting aggressive expansion internationally.

Finally, Associated shares would boost my passive income right now through dividends. A dividend yield of 2.2% is below the FTSE 100 average, but I’d expect this to grow over time. However, I am conscious that dividends are never guaranteed.

Cautiously optimistic

Despite my bullish stance on Associated shares, I can see the shares are currently trading on a price-to-earnings ratio of close to 20. This is a tad high, and more than the FTSE 100 average of close to 13. Any negative trading or bad news could send the share price downwards.

Furthermore, Associated could see its margins squeezed, at least in the short term, because rising costs could impact its food production costs. This is something I will keep an eye on as profits underpin returns and growth.

Overall, Associated British Food shares could be a shrewd addition to my holdings now. There are signs a bull run could be on the horizon, so I’m looking for quality FTSE 100 stocks that could soar when and if it occurs.