A range of FTSE 100 companies have their shares down at the moment. However, one in particular stands out to me.
I’m convinced this stock, now down 38% from its all-time high, is positioned for massive growth over the next decade.
Considering I’m a value investor, I know that these opportunities don’t come along very often for the great companies on the market. That’s why I made sure to buy my stake now.
Falling down
The company in question, RS1 Group (LSE:RS1), is a leading global distributor of industrial and electronic products and solutions.
In 2021, I think its shares were overvalued, and that would have contributed somewhat to the fall that came next. I noticed that its price-to-earnings ratio was 40 that year, and it has now dropped to around 16.
Investors in the market may have sold off the stock as a result of a decrease in net income in 2021. However, I think they grossly overreacted, considering it reported all-time-high earnings in 2022.
Now, the CEO Lindsley Ruth did step down in 2022. That may have also affected investors’ perceptions of the business, as big executive changes can spell instability troubles ahead.
Greedy when others are fearful
Here’s a famous Buffett quote I keep in mind throughout my daily and investing life: “Be greedy when others are fearful, and fearful when others are greedy.”
So, taking his wisdom on board, I wanted to take a look at RS1 a bit closer because I reckoned it had more going for it than the present share price was suggesting.
First of all, I considered the firm’s good net margin of 8% when I made my investment in its shares. That’s better than 75% of companies in its industry.
Then, I noted its 13% revenue growth rate on average over the last three years. That’s not to mention its healthy dividend yield of 2.8%.
Keeping a cautious attitude
Famous investor Bill Ackman described investing recently as being largely a game of temperament. Therefore, I have been careful not to invest too heavily in this one company, as I consider that having an unbalanced temperament.
RS1 makes up about 5% of my total portfolio. I have varied my other investments over 14 or so other businesses, helping to secure my finances.
The proper term for what I’ve done with my assets is diversification. It works wonders in protecting me from risks specific to one individual company or industry.
RS1’s risks
Every investment has a set of risks, and I think RS1’s biggest one could be its balance sheet. As it has more debt than equity on its books, I’ve made sure to keep an eye on how it manages this moving forward.
Also, while the company has diversified operations across the entire world, over 50% of its revenue comes from the US and the UK. That means that if any economic downturns strike either of these countries, the shares could be significantly impacted for the worse.
I bought it
My confidence in these shares is high, and I invested a significant amount of my savings in them.
I genuinely believe that this may be a once-in-a-decade chance for me to profit substantially from this great London-listed business. Primarily, that’s a result of its rare valuation at this time.
