Buying stocks in the same month companies are due to announce results sounds like a risky move. So long as I focus on picking quality businesses however, I think long-term investors such as myself can take such things in our stride.
Here are three examples from the FTSE 100 I’d be happy to buy, regardless of what they say in June.
Safety products firm Halma (LSE: HLMA) reports full-year numbers on 10 June. Based on its most recent trading update, I don’t think there’s much for existing holders (or prospective buyers) to worry about.
Back in March, the FTSE 100 member said it had made “good progress” over the previous six months. Thanks to a recovery in markets such as China, it predicted adjusted pre-tax profit would come in around the same level achieved in the previous financial year. It had previously expected it to be 5% below FY2019/20’s level.
Sure, value investors will baulk at the valuation (42 times forecast earnings). The opportunity cost of not investing elsewhere also needs to be considered. However, the essential nature of its various products and services gives Halma a defensiveness many firms in the FTSE 100 arguably lack. As such, I’m confident it’ll still outperform its index over the long term.
Factor in strong cash generation, sound finances and dependable dividend hikes and I continue to think this is a company to tuck away in the bottom drawer.
Of course, the prospect of good news doesn’t mean the share price won’t continue trading within the 500p-600p range it’s been stuck in. The potential for coronavirus variants to disrupt things going forward also can’t be ruled out.
Notwithstanding this, the beauty of Auto Trader is that everything’s online. Its status as a portal gives it the ability to navigate inevitable economic setbacks far more easily than bricks and mortar dealerships.
What’s more, a price-to-earnings ratio of 26 for FY22 looks reasonable. After all, Auto Trader consistently generates sky-high margins and returns on capital (ROCE). A commitment to focusing on the latter is one reason why star fund managers such as Terry Smith and Nick Train consistently outperform the market.
A final FTSE 100 stock I’d have no issue buying next month is Ashtead Group (LSE: AHT). The construction and industrial equipment rental giant reports on trading on 15 June. Again, I don’t expect any nasty surprises. Back in April, the company said it expected full-year results to be “slightly ahead” of management’s previous expectations.
When it comes to share price performance, the £22bn-cap takes no prisoners. Over the last year, Ashtead has more than doubled in value. By contrast, the FTSE 100 is up ‘just’ 14%. Some short-term profit-taking can’t be ruled out, but I wouldn’t expect this to last for long. Trading can only improve as more construction projects get the green light as economies open up from their coronavirus-induced slumber.
At 28 times forecast earnings, Ashtead can never be labelled ‘cheap’. As billionaire investor Warren Buffett suggested, however, it’s “far better to buy a wonderful company at a fair price than a fair company at a wonderful price.“