Investing £5k (or indeed, any other amount) in FTSE 100 shares after the recent market crash could be an excellent long-term move. However, some of these blue-chip champions have much brighter prospects than others. With this in mind, here’s one FTSE 100 stock that could offer big profits for investors in the long run.
FTSE 100 stock bargain
Sectors such as retail have been severely impacted by coronavirus. This is a headache for Associated British Foods (LSE: ABF).
The group’s Primark clothing and lifestyle retail division has seen sales fall from £650m a month to zero in recent weeks. It has no online distribution operation so the retailer is suffering more than peers, which can still deliver products to customers.
Nevertheless, despite problems at Primark, the FTSE 100 stock looks well-placed to weather the coronavirus crisis.
Alongside the retail division, the conglomerate also sells food and food ingredients. These businesses have been running at full capacity. Indeed, according to a recent trading update, the group’s factories had to produce more food than ever during the first few weeks of March.
These divisions have continued to rack up sales while Primark remains closed. This income should ensure that ABF can keep the lights on throughout the retail lockdown.
In addition, the company has plenty of funds for the time being. It has available central cash of £1.5bn, more than enough to cover estimated cash burn of around £100m a month for more than a year.
Still, despite this capital, management has taken the decision to cancel its interim dividend. That’s disappointing, but it’s to be expected. It doesn’t make sense for the FTSE 100 stock to be paying out profits to investors at present.
Long-term buy
Looking ahead, it’s clearly uncertain, at this stage, when the UK will exit its lockdown. As such, the group is likely to see continued operational disruption in the short run. However, the company has a strong balance sheet and large food business. So, it seems to be in a relatively stable position to overcome its present challenges.
Therefore, while the FTSE 100 stock might see further declines in the near term, investors who are willing to buy today and hold over the long run could see high returns.
Moreover, ABF’s founding family still own the majority of the FTSE 100 stock. That suggests management is highly incentivised to achieve the best outcome for all investors. This implies they’ll do whatever it takes to get business back to growth. This also implies the company could look to restart dividends as soon as possible when growth returns.
All in all, if there’s one FTSE 100 stock that’s worth buying to profit from the stock market crash, Associated British Foods certainly appears to offer all the right qualities.
