The chance to buy stakes in wonderful companies at a discount strikes me as incredibly appealing. This is why I always have a watchlist of FTSE 100 stocks ready for the next market correction or, dare I say it, a crash. And with the US market looking frothy (and London tending to replicate whatever happens in New York), I wonder if one of these may come sooner than later.
FTSE 100 market leaders
The first stock on my shopping list would be Auto Trader. Operating completely online (the print version was ceased years ago), the FTSE 100-listed vehicle marketplace is the clear market leader. Apparently, more than 75% of all time spent looking at car adverts is on the company’s site. I suspect this figure might be even higher now following the scramble for second-hand motors due to the global chip shortage.
The other leader is property portal Rightmove. Like its automotive equivalent, this FTSE 100 constituent is the go-to destination for buyers and renters. For years, competitors have tried but failed to take meaningful market share, suggesting RMV’s brand serves as a great economic moat. Throw in a bulletproof balance sheet and (like Auto Trader) spectacular returns on capital, and RMV would be a compelling purchase for me.
There are still things to be aware of, of course. The vehicle and housing markets in the UK should moderate in time and could even plummet in the event of a serious economic wobble. Moreover, I don’t expect either company to ever be screamingly cheap, since quality rarely lacks friends. So I’d need to stay realistic with my target purchase price.
Third on my list of FTSE 100 to buy is luxury brand Burberry. This may seem an odd choice, especially as the company still hasn’t recovered from the coronavirus crash. Moreover, the recent fall in retail sales in China doesn’t exactly bode well. After all, BRBY is hugely dependent on shoppers continuing to buy into its highly-coveted brand.
As an existing owner, I’m not worried. Burberry’s long history (and sound finances) clearly mark it as one of the FTSE 100’s most resilient members and one I’d continue to buy in a correction.
Notwithstanding this, it’s important for me to monitor just how much exposure I’d have if I continued to buy on a correction. Too much money in one company’s risky. I want to sleep at night!
Then again, all this may prove immaterial. I still reckon BRBY will be bought out before long.
Last of my FTSE 100 buys would be a stock I once owned and stupidly decided to sell too soon. Health and safety tech firm Halma‘s share price has rocketed since. As I type, it’s up 36% in the last year. Anyone buying five years ago would have tripled their money.
Still, a forward P/E of 50 suggests shares are now priced to perfection. Yes, Halma operates in a highly defensive sector. And yes, a multi-decade history of hiking dividends is nothing to be sniffed at. However, there comes a point when it’s wise to pull back from a purchase if I feel I’d be overpaying.
This is why the HLMA remains on my watchlist, for now. When the next correction inevitably comes, I want to have some dry powder ready…
Markets around the world are reeling from the coronavirus pandemic…
And with so many great companies still trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.
Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…
You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.
That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.
Paul Summers owns shares in Burberry. The Motley Fool UK has recommended Auto Trader, Burberry, Halma, and Rightmove. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.