Many FTSE 100 stocks have made phenomenal gains so far this year. They include some of the index’s best-known names. Companies like J Sainsbury (+35%), Lloyds (+38%) and BP (+47%).
However, there have also been some notable losers. Among them are a number of high-quality stocks with attractive business fundamentals. In fact, there are five of these blue-chips that look very buyable for me right now.
Quality FTSE 100 stocks at a discount
The table below shows the performances of the FTSE 100 and the five stocks for the year to date and over the last 12 months.
|
|
Year to date (%) |
12 months (%) |
|
FTSE 100 |
+12 |
+24 |
|
Hikma Pharmaceuticals |
-5 |
-11 |
|
Unilever |
-10 |
-17 |
|
Intertek |
-10 |
-16 |
|
Smith & Nephew |
-14 |
-12 |
|
Fresnillo |
-23 |
-35 |
As you can see, the five stocks have underperformed the Footsie index by wide margins. These discount prices strike me as too good to miss.
Healthy growth
Hikma Pharmaceuticals specialises in branded and non-branded generic medicines. Bringing new generics to market can be challenging but the company has a good record of gaining regulatory approvals.
A recent acquisition (subject to regulatory approval) further strengthens its product portfolio, pipeline and R&D capabilities. I see good value in a rating of 16.5 times current-year forecast earnings for a company forecast to grow earnings by more than 20% in 2022.
Warren Buffett tried to buy this FTSE 100 stock
Unilever is world renowned for its brands in home and personal care, and food and refreshment. Brand-building has become somewhat easier for new market entrants in the digital age, but I reckon it would be hard to dislodge loved and trusted brands like Unilever’s Domestos, Vaseline and Hellmann’s.
The company is currently valued below the price top investor Warren Buffett was willing to pay for it a few years ago. And that’s good enough for me.
Quality assured
Intertek is one of the world’s leading providers of total quality assurance, delivering assurance, testing, inspection and certification from its network of 1,000+ laboratories and offices in 100+ countries.
Quality assurance is a structural growth sector and the Covid-19 pandemic has only expanded demand for Intertek’s services. The company’s acquisition-aided growth adds some risk, but I think the long-term opportunities are such that a premium rating of 26 times current-year forecast earnings shouldn’t be prohibitive for me.
A pandemic wobble
Medical devices group Smith & Nephew has several divisions but is probably best known for hip and knee implants. The company’s performance over the last 18 months has been crimped by postponements of elective surgery due the pandemic.
However, I’m looking beyond the near-term challenge of regaining pre-pandemic business momentum. I see value in a rating of 20 times current-year forecast earnings with the company forecast to grow earnings by more than 20% in 2022.
The FTSE 100’s worst-performing stock
Declines of 23% for the year to date, and 35% over the last 12 months, make Fresnillo the Footsie’s worst-performing stock. The company is the world’s largest producer of silver and one of Mexico’s largest gold miners.
The volatility in precious metals prices tends to be exaggerated in the share-price movements of a miner like Fresnillo. I can live with it. Indeed, it’s what’s providing me with the current opportunity to buy into a company with a strong balance sheet, high-quality assets and low-cost operations at a rating of 15 times current-year forecast earnings.
