One FTSE 100 share I would buy today is Experian (LSE: EXPN). Perhaps best known for its consumer-facing credit rating business, the global technology company is one of the world’s leading credit rating agencies. It provides services to corporations and customers looking for financial information about themselves or their clients.
The business of data
Data is an exciting business. The companies best-positioned to succeed are those with the most information, as the more data a firm has available to it, the more information it can gather from that data.
That’s where Experian’s competitive advantage lies. The FTSE 100 group has more information than virtually any of its competitors. That means it can offer a level of service other providers cannot replicate. This volume of information is growing every day, which implies the company’s competitive advantage is also increasing every day.
Unfortunately, this competitive advantage could also become a drawback. If Experian suffers from a data breach, it could lead to significant reputational ramifications. This has already happened to one of its peers, Equifax. The resulting legal storm cost the company substantial sums, and it had to provide customers with compensation. There’s no guarantee Experian won’t face the same fate.
Still, despite this risk, I would buy the stock today for its competitive advantage. I think the FTSE 100 business can continue to produce large returns for its investors as it continues to build its competitive edge in data and the financial industry.
FTSE 100 tech leader
Another company that I think has a competitive data advantage is Relx (LSE: REL). The global provider of information-based analytics and decision tools reported an overall decline of around 12% in revenues for 2020. Its exhibitions and face-to-face businesses have suffered the most significant impacts. Exhibitions revenues plunged more than 70% last year.
However, the group’s so-called electronic revenues, including data analytics, increased 4% in 2020. I think this will be a crucial area of growth for the business as we advance.
Relx has the same competitive advantage as Experian, in my view. The group has an established data business, which is growing every day. This allows it to offer an unrivalled service.
While the exhibitions business suffered in 2020, it seems likely this will start to recover in 2021, which bodes well for future growth, in my opinion.
Relx is also exposed to the same risks as Experian. If it suffers a data breach or its data is compromised in any way, there could be significant monetary and reputational repercussions. They could also be repercussions if the company does not act to keep its data as relevant as possible. After all, no one wants to pay top dollar for inadequate information.
Another risk is the company’s acquisition program. Last year the group acquired 11 new businesses for a total outlay of £878m. These deals should help complement growth, but if the corporation overpays or struggles to maintain the debt built up buying these firms, shareholders could suffer.
Considering the risks and opportunities available to the FTSE 100 business, I would buy the company for my portfolio today.
