Down 40%, this FTSE 100 stock is my top pick for April

Markets can be irrational, and as this FTSE 100 stock trades at its Covid lows I’m sniffing out an opportunity to double down on my holdings.

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As a die-hard value investor, I’m always on the lookout for high-quality stocks in the FTSE 100 that, for whatever reason, have fallen out of favour with the market. Tracing its roots back 175 years, I believe that this household financial name is in serious bargain territory.

High-growth markets

Prudential (LSE:PRU) isn’t your typical FTSE 100 insurance business. Compared to the likes of Legal & General and Aviva, it operates solely in Asia and Africa. These are low-penetration markets that offer exceptional growth potential.

The company estimates that its markets will collectively generate incremental annual gross written premiums of $1trn in 2033 compared with 2022. It looks well placed to take a significant slice of this growing pie.

Today, it holds a top three position in 10 out of the 14 Asian life markets in which it has a presence. And a top five in six of its eight African markets.

In 2023, new business profits grew by 45% to $3.1bn. This was primarily driven by a surge in demand following the reopening of the border between mainland China and Hong Kong, its largest market.

Multichannel distribution

Prudential’s business model is quite unique. It operates primarily through a distribution network of agency and ‘bancassurance’ partnerships with a digital platform.

Its Agency business is its lifeblood, accounting for half of all its annual premium equivalent (APE) sales. It has around 68,000 monthly active agents. A growing proportion of these are members of the prestigious Million Dollar Round Table association.

Over the next few years, its aiming to increase agency new business profit by three times. It hopes to achieve this by significantly growing its number of active monthly agents.

In order to grow at this rate, it’s investing heavily in talent recruitment and retention. Its career switcher programme continues to bear fruit. On average, advisors recruited and trained through this programme are six times more productive in their first year compared to other typical agent recruits.

Selling insurance-related products is above all a people business. Agents require the skills and tools so that they can build trusted relationships with their clients. This is where PruForce comes in.

Across its business, over 4m leads were generated and distributed to its agency force throughout 2023 using its digital leads platform. This led to an uplift in average productivity of 30%.

Buy for growth not dividends

Prudential is not a high-yielding stock like many of its peers in the FTSE 100. But given that I already own shares in Aviva and Legal & General, I’m comfortable with that.

Its exposure to Asia provides it with growth opportunities that are simply not there in pure UK plays. However, its over-exposure to the likes of China can be a double-edged sword.

The Chinese economy continues to struggle since reopening after Covid. In particular, the continued woes in the property sector have the potential to weigh on the region’s economic outlook for a protracted period.

But when I look at the bigger picture, with a combined population in its markets of 4bn people, I find it hard to believe that this stock will be trading near its Covid lows for too long. That’s why I will be buying more this month.

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.

Andrew Mackie owns shares in Prudential. The Motley Fool UK has recommended Prudential Plc. 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.

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