The market is no longer feeling the love for a number of FTSE 100 stocks it was recently rating highly. For example, Smith & Nephew (LSE: SN), Hikma Pharmaceuticals (LSE: HIK) and London Stock Exchange Group (LSE: LSEG) are now trading at discounts of up to 33% to their 52-week highs.
I believe they’re quality businesses with excellent long-term prospects. And that the market has overdone its de-rating of them. Today, their shares look very buyable for me and I think they could significantly grow my wealth by 2030.
Road to recovery
Smith & Nephew is a world leader in joint replacement systems for knees, hips and shoulders. Its other specialities are in soft tissue repair and advanced wound management.
The business suffered during the pandemic, due to the postponement of many non-critical surgical operations. There’s a risk that a persistence of delays and of global supply-chain issues could further dent market sentiment towards this FTSE 100 stock. However, I expect management to report an improvement on 2020 in its 2021 results tomorrow. And to guide for a continuing recovery in 2022.
The shares are currently 25% below their 52-week high. They’re rated at 17.5 times consensus forecast earnings for 2022. I think this represents good value for a business that’s nicely aligned with a number of long-term growth drivers, including ageing populations and people’s desire to remain active for longer.
Too cheap to ignore
Rising population and healthcare demand are also long-term tailwinds for Hikma Pharmaceuticals. The company’s portfolio comprises a broad range of branded and non-branded generic medicines. Developing new generics and securing regulatory approval for them can be challenging and protracted. But Hikma’s good record offers me some comfort against this risk.
The business has been more than resilient through the pandemic. It reported 15% growth in earnings in 2020. And I’m expecting further double digit growth when it announces its 2021 results on Thursday. I think a bright outlook statement for 2022 is also on the cards.
The shares are currently 27% off their 52-week high. They’re rated at just 12 times 2022 consensus forecast earnings. Given the momentum in the business and the long-term tailwinds for growth, this FTSE 100 stock looks too cheap for me to ignore.
Transformational acquisition
London Stock Exchange Group transformed itself with the $27bn acquisition of Refinitiv in January last year. Today, it’s not only an exchange operator (a highly attractive business in its own right), but also owns lucrative data and analytics infrastructure at the heart of financial markets.
Initial investor enthusiasm for the deal has waned since it completed. The shares are currently down 33% from their 52-week high. Mega-acquisitions come with risk. And one of those risks — integration costs higher than originally anticipated — soon raised its head.
However, I was encouraged by a trading update in October. Management said it had made good progress on the integration and was comfortably on target for cost synergies ahead of original phasing.
Integration and other acquisition risks haven’t yet been definitively relegated to the rear-view mirror. But priced at 21.5 times 2022 consensus forecast earnings, I think the size of the long-term growth opportunity for the combined businesses makes this another FTSE 100 stock that could significantly increase my wealth by 2030.
