With the FTSE 100 reaching an all-time high, much focus has turned to this large-cap index. But it made me think, if I could pick just one Footsie stock to put all my money in, what would I go for?
Putting 100% of cash in just one stock isn’t something that investors should normally do. I usually diversify and spread my risk. That said, there is one FTSE 100 giant that could be a prime candidate.
It’s pharmaceutical giant Astrazeneca (LSE:AZN). With a market capitalisation of £179bn, it’s currently the largest company in the FTSE 100.
A top performer
Astrazeneca shares have treated shareholders well over the years. I calculate if I had invested £20,000 in them a decade ago, they would have grown to be worth over £90,500 today.
But what about now? Well, I reckon it could continue to be a FTSE 100 winner over the coming decade. Its prospect for the future looks promising.
Let’s take a closer look.
A promising FTSE 100 titan
Astrazeneca’s biggest strength is its oncology portfolio. A decade ago, the company turned its focus to cancer treatments. Oncology went from around 10% of sales to 33% of sales today.
In hindsight, that decision looks particularly smart. It led to many effective treatments and several billion-dollar blockbuster drugs. Looking ahead, the company continues to innovate and focus on this growing sector.
Part of Astrazeneca’s strategy is to concentrate on research and development. With an R&D budget close to a quarter of its sales, that’s among the largest in this sector.
It’s a strategy that’s paying off. The FTSE 100 titan is making excellent progress in its pipeline of drugs so far, but it looks like there’s plenty of growth still to come.
It aims to launch at least 15 new medicines by the end of the decade. According to CEO Pascal Soriot, 10 of its 30 latter-phase trials have the potential to earn over a billion dollars in sales.
Worth a look
Investors should bear in mind that investing in the largest FTSE 100 company isn’t risk-free. Drugs trials can disappoint, and patents eventually expire. Pharmaceutical businesses can often be hit with lawsuits too.
Unlike some consumer staples companies like Diageo and Unilever, Astrazeneca’s profit margin can fluctuate. But in contrast, it offers far greater earnings potential.
And as a long-term investor looking to grow my capital over time, I’d rather put 100% of my money in the latter.
Should I buy this share?
Astrazeneca managed to double its sales over the past five years with a proven history of growing earnings. It currently trades on a price-to-earnings ratio of 18, which doesn’t strike me as expensive for this business.
A 2% dividend yield is welcome but below the FTSE 100 average. That said, I see it more as a bonus than a main reason for me to invest.
Overall, Astrazeneca’s history, strategy, and business characteristics make it a winner for me. If I had spare cash, I’d certainly buy this share today. And if I had to choose just one stock to invest in, this would be it.
