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1 FTSE 100 stock I’d buy and hold for a long time

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Today is a relatively good day for the stock markets. The FTSE 100 index is back up above 7,000 after the tremors felt earlier this year, originating from Asia. Expectedly, stocks exposed to China, that fell most, are also among the biggest gainers today as stability returns. So far they have gained anywhere between 3% and 4%. In this environment, it is easy to miss out on other FTSE 100 news makers that are also gaining. Like the safety equipment provider Halma (LSE: HLMA), which is up 1.5% today.

Halma posts positive trading update

This rise follows the company’s positive trading update. For the period starting 1 April up to now, the company reports that its performance is ahead of expectations. It says that revenue growth has actually exceeded historic levels. A reduction in variable costs that were due to the pandemic has also positively impacted its bottom line. 

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It has also reported positive developments across segments. In both the safety and environment segments, it reports “the strongest organic revenue and profit growth in the year to date” as demand returned since the moderation of the pandemic. In its safety segment, Halma provides products related to elevator safety and fire detection, among others. Under environment, it helps in gas detection and water treatment and analysis. Its medical segment, which provides products that support eye and heart health, among others, has also benefited because of a return of elective medical procedures. 

Strong performance for the FTSE 100 stock

It has also said that its orders are strong, which should continue to reflect in the company’s performance over time. This in turn, can translate into further increases in its share price. Over the past year, Halma’s share price has increased around 40%. This is really good going for a firm that has already performed well even when the stock markets were sluggish during the worst of the pandemic last year. It has performed well over a longer time period too. Over the past three years, it has almost doubled its share price. 

Pricey, though

With this as the background, it is little surprise that Halma is a pricey stock with a price-to-earnings (P/E) ratio of around 57 times. At a time when other promising stocks are seeing a decline in share prices, especially after the recent weakness in stock markets, it can look less attractive for this reason.

But I think this particular stock is in a different league. Much like the pharmaceutical biggie AstraZeneca, whose P/E has stayed significantly higher than the average FTSE 100 ratio for at least the entire time that I have covered it, it too stays high for a reason. And that I reckon is because it is a financially healthy defensive that also has a promising future. When I wrote about it last year, its P/E was 46 times and it has only risen since. 

What I’d do

Ideally, I would like to wait for a dip in its share price before buying it, but I am not sure if a meaningful dip will come anytime soon. Going by its past performance, share price trends and outlook, now is a good time as any for me to buy and hold the stock for a long time.

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Manika Premsingh owns shares of AstraZeneca. The Motley Fool UK has recommended Halma. 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.

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