The FTSE 100 is at all-time highs and closing in on 10,000. Time to bank profits?

The FTSE 100 index has had a strong run recently. It’s up around 20% year to date and yesterday (11 November), it hit a new all-time high (within touching distance of 10,000).

Could this be a good time for investors to consider banking some profits? Let’s discuss.

Is the FTSE 100 overvalued?

Looking at the large-cap index today, it doesn’t look overvalued to me. Currently, the median price-to-earnings (P/E) ratio across the index is 13.8 on a forward-looking basis.

That’s not particularly high. For reference, the figure for the S&P 500 index is about 19.

Of course, there are a few stocks within the Footsie that look a little expensive. Some examples here include Rolls-Royce, Games Workshop, and Antofagasta, which trade on P/E ratios of 36, 28, and 30.

But there are also some stocks that look downright cheap. Names here include Barclays, 3i Group, and JD Sports Fashion, which sport P/E ratios of eight, seven, and six.

Weighing this all up I don’t think it makes sense to sell the FTSE 100 (that is, FTSE 100 index funds) on valuation grounds. There are no major red flags here right now, in my view.

Underwhelming returns from here?

That said, after a 20% return this year, I wouldn’t expect huge returns from the FTSE 100 next year. Because this year, we’ve essentially seen many years worth of returns in a short space of time (the average return from the FTSE 100 over the last 20 years is a little over 6% and that’s with dividends included).

Looking ahead, I think individual stocks are likely to offer more return potential. So, if one is looking to maximise their returns, it could make sense to focus on opportunities here instead of on the index as a whole.

An investment opportunity to consider

Going through the Footsie today, one stock that jumps out at me as attractive is Prudential (LSE: PRU). It’s an longstanding insurance company that’s focused on Asia and Africa (two high-growth markets).

This stock has a lot going for it right now, to my mind. For starters, the company has strong operational momentum at present.

In Q3, for example, new business profit was up 13% year on year. This was fueled by strong growth in Hong Kong and Mainland China.

Secondly, it looks cheap. Currently, it trades on a forward-looking P/E ratio of 12 (so it’s trading at a discount to the market).

Third, brokers are becoming quite bullish. Jefferies, for example, recently raised its price target to 1,500p – nearly 40% above the current share price.

Finally, the shares are in a strong uptrend (but still well below their all-time highs). Note that in the investing world, it’s often said that ‘the trend is your friend’ because trends can stay in place for a while.

Now, every individual stock has its own unique risks and this stock is no different. With Prudential, economic weakness in individual countries across Asia and Africa is a risk.

I really like the look of the shares as we head towards 2026, however. I think they’re worth considering as a long-term investment.

And it seems that many of my colleagues share my view…