FTSE 100 stocks have been on the rack for three weeks now. It’s been painful to watch. However, there’s a silver lining. This stock market crash provides a rare opportunity for long-term investors to buy into high-quality companies at prices that were unthinkable just a few weeks ago.
Over the past year or so, I’ve looked at plenty of blue-chip businesses I felt had become too expensive. This is always likely to happen after a long bull-run, if you’re using disciplined fundamental valuation in your investing. However, with discounts of up to 36%, here are five high-quality FTSE 100 stocks I think have now become unmissable buys.
Wise move
I last wrote about accounting software giant Sage (LSE: SGE) after its annual results in November. The scale of the business is attractive. I also believe it’s maintaining a competitive advantage, albeit at the cost of somewhat lower revenue growth and margins than it was targeting a few years ago.
Back in November, the shares were trading at 707p, with the P/E around 25. I wrote: “I believe the valuation is too high for the level of growth and margins it’s likely to offer going forward in an increasingly competitive market. At a sub-20 earnings multiple I might be interested, but at around 25 I’ll continue to avoid it.”
Sage’s share price ended Thursday at 560p. This is 21% below the price in November, and 29% down from the immediate pre-crash price on 21 February. It’s now trading at 19.7 times trailing earnings, and at a forward 12-month P/E of 18.2. With a prospective 3.2% dividend yield just for good measure, I’m happy to rate Sage a ‘buy’ today.
FTSE 100 stocks Rightmove, Hargreaves Lansdown, Experian and Compass are the other four quality blue-chip businesses I believe have become very buyable. Like Sage, they all have pre-eminent positions in their markets.
UK leaders
Rightmove has established itself as the place to go for anyone wanting to sell or let a UK property and, likewise, anyone wanting to buy or rent. Its shares having dropped 25% to 516p in this market crash. I think a forward P/E of 23.5 and modest dividend yield of 1.5% are great value for such a dominant business in its sector.
Hargreaves Lansdown is the UK’s number one ‘investment supermarket’ for private investors. After falling 29% to 1,211p, I see this as another high-quality FTSE 100 stock that’s become very attractively priced. The forward P/E is 20, and the prospective dividend yield is a tasty 4%.
World leaders
Experian, the world’s leading credit reference agency, and Compass, the world’s largest contract caterer, were trading at P/Es of near 30 and 25 respectively, when I wrote about them last summer. I felt both stocks were too richly valued to buy at that time.
Experian’s shares have fallen 27% in this stock market crash. They now trade at a forward P/E of 23.5, with a prospective 2% dividend yield. That’s highly attractive, in my book.
Compass’s shares have seen the biggest fall among these five high-quality FTSE 100 stocks. They’re down 36% at 1,241p. This global caterer has exposure to airports and schools, and thus to the impact of Covid-19. However, I think this is more than offset by a forward P/E of 13.6 and a 3.6% dividend yield.
