1 FTSE 100 stock I would buy and hold

Jabran Khan details a FTSE 100 stock he likes for his portfolio and explains why he would buy and hold the shares for the long term.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

FTSE 100 incumbent Hikma Pharmaceuticals (LSE:HIK) is a stock I would buy for my portfolio and hold for a long time. Here’s why.

FTSE 100 pharma giant

Pharmaceutical companies haven’t always had the best reputation. This has often resulted in negative investor sentiment. The rising costs of life-saving and essential medicines has contributed to this negativity. I believe Hikma is different from a traditional pharma firm. It manufactures generic, branded, and injectable pharmaceuticals and markets them at an affordable price.

As I write, shares in Hikma are trading for 2,265p. At this time last year, shares were trading for 10% higher at 2,522p. This is not a concern for me. In fact, I see it as a buying opportunity to pick up shares cheaper than usual. Looking back at the Hikma share price over a longer period, it has risen steadily over the past five years.

For and against

FOR: Hikma’s recent and historic performance is positive. I know past performance is not a guarantee of the future but I use it as a gauge nevertheless. I can see revenue and gross profit have increased year on year for the past four years. Recently, a trading update in November revealed guidance for full-year results is on track for another year of growth. 

AGAINST: Hikma is not the only pharma firm in its space where it attempts to manufacture cheaper alternatives to expensive drugs. This competition could significantly affect market share and performance. This would affect shareholder returns to existing investors and potential investors such as myself.

FOR: The current pandemic, as well as ageing population of the world, could benefit Hikma’s performance. Since the pandemic began, the likelihood of seeing a doctor or getting a hospital bed, especially in the UK, has declined massively. This has led many people to turn to over-the-counter options and with economic pressures weighing on people’s pockets, cheaper options are attractive. No matter the circumstances, medicines will always be required. 

AGAINST: The macroeconomic environment and current pressures could affect performance for Hikma and investor returns. Rising inflation and costs could eat away at margins. In addition to this, the labour market and shortage of workers could also affect operations and in turn performance. These issues are affecting other FTSE 100 picks for my portfolio too.

My verdict

I would add Hikma shares to my portfolio at current levels and hold them for the long term. I believe Hikma has a good market share in its sector to continue to grow in terms of performance and provide me good returns as an investor. It also continues to acquire businesses to enhance its offering.

I must keep an eye on risks that could derail progress but most of these are shorter-term issues, such as the macroeconomic issues I noted. At current levels I believe Hikma is a cheap FTSE 100 stock with a price-to-earnings ratio of 14.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals. 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.

More on Investing Articles

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »