Recently, I have been combing the FTSE 100 looking for bargain no-brainer blue-chip stocks to buy after the recent sell-off. I think the lead index is the perfect place to look for undervalued opportunities. Indeed, some of the companies in the index have seen massive share price falls.
The equities have been falling even though their underlying businesses continue to trade in line with management projections.
However, I should make it clear that while it looks as if these companies are trading in line with expectations today, the world is currently going through a period of significant economic stress.
This means these projections could be unreliable. The world could change at a moment’s notice.
If there is a substantial change in the economic environment, these companies may not meet their expectations over the next few years. We can only go on what we know at the moment.
Even after taking these risks into account, I think there are plenty of corporations in the FTSE 100 I would like to buy for my portfolio considering their competitive advantages.
Here are two companies I would acquire for my portfolio right now.
FTSE 100 growth stock
The first on my list is the Asia-focused life insurance and financial services enterprise Prudential (LSE: PRU). Shares in this company have plunged in value over the past couple of months.
Last year, the stock traded as high as 1,600p per share. At the time of writing, the stock is changing hands at around 1,000p per share. That is a decline of around 40% in a couple of months.
Despite this performance, the stock is fundamentally strong.
After the 2019 spin-off of M&G and the subsequent demerger with US-focused Jackson Life, the business’s attention is now on Africa and Asia. Unfortunately, the corporation is having to deal with some extra costs as a result of this translation. Following the Jackson deal, the firm had to book a negative fair value adjustment of $8.3bn (£6.3bn).
Still, there is no denying that the firm has huge growth potential. An estimated 80% of the population of Asia is still without insurance cover. The market is worth an estimated $1.8trn.
Investing for growth
To capitalise on this potential, the group has raised $2.4bn from investors. Most of this has been used to reinforce its balance sheet, which may put it in a better position to grow in the years ahead.
In the near-term, growth could be subdued. Eight markets in Asia and its Africa business delivered double-digit annual premium equivalent (APE) sales growth last year. However, its biggest market, Hong Kong, was hit by the ongoing closure of its border with mainland China. As a result, overall sales declined.
The key risk the company will face going forward are further border closures. This market is also incredibly competitive. There is no guarantee Prudential will be able to match its peers on price in this huge market.
Despite these challenges, I think the market’s opinion of the business today is far too negative.
That is why I would take advantage of recent declines and acquire the FTSE 100 company for my portfolio considering its position in the vast Asian financial services market.
Marketing development
WPP (LSE: WPP) is a company investors love to hate. The enterprise was one of the most sought-after stocks in the FTSE 100 until its CEO and founder, Sir Martin Sorrell, left on fairly poor terms several years ago.
Since then, the group has been in recovery mode. It has sold off non-core divisions, reduced debt and made new investments in key growth areas such as digital advertising.
Unfortunately, while the company was in the middle middle of its transformation programme, the coronavirus started to impact the global economy.
As the pandemic ravaged the global economy, businesses pulled their advertising spending budgets. This had a significant impact on the advertising and marketing group.
The good news is, the company is now back on track.
FTSE 100 company recovery
According to its latest results release, revenue increased 13% on a like-for-like basis in 2021. The group also returned a profit after losing money in 2020. As profits and sales have recovered, the company has started returning cash to investors.
Last year, it returned £1bn, and further cash returns seem likely as the company returns to growth.
It is already spending a lot of money repurchasing shares, which should increase earnings per share and the firm’s valuation in the long run. That is without taking into account its dividend yield. At the time of writing, the stock supports a dividend yield of around 3%.
That said, this is a highly competitive market. One of the reasons why WPP fell behind in the first place is that it was losing share to American technology giants. These companies have only become bigger over the past couple of years.
Competitive environment
That means the FTSE 100 group has its work cut out to maintain market share in this incredibly competitive environment.
As inflation increases, companies may also revisit their marketing budgets and cut spending in order to reduce costs.
These are some of the biggest challenges the group may face as we advance, although they are not the only headwinds that could hit growth.
However, despite these risks and challenges, I think the company looks attractive as an FTSE 100 growth and income play.
As the corporation returns to growth and capitalises on its core strengths, I think the enterprise can continue to return cash to investors and will make a great addition to my portfolio.
