Many FTSE 100 companies like Tesco and Next are household names. But several are still relatively unknown to the masses.
That could be if their customers are other businesses rather than individuals. Nonetheless, there are many gems hiding within the Footsie.
A FTSE 100 top performer
For instance, Halma (LSE: HLMA) is a global group of life-saving technology companies. Its focus areas include safety, environment, and health. Halma focuses on these areas as they have resilient, long-term growth drivers. After all, its equipment is backed by government regulation.
Somewhat unusually, it owns around 50 companies, which are managed by their own boards. Doing so allows business decisions to be bespoke to the needs of each company.
One thing I like about Halma is its impressive track record. Sales and profits have consistently grown by 10% a year over the past 10 years. Few companies can match such stability.
Investors that bought its shares a decade ago would be enjoying a four-fold gain on their money. That puts it in the top 10% of all FTSE 100 shares.
Its growth strategy is to continue to buy and grow businesses in its chosen niche areas. Strong cash generation from existing companies allows it to invest for future growth. It’s a strategy that has been working well for it and shows no sign of slowing down.
Price worth paying
Many FTSE 100 companies are global. And Halma is no exception. The US is its largest market, with 42% of total sales. Having a diverse geography can avoid putting all its eggs in one basket. For instance, UK growth has been modest, but growth over the pond has more than made up for it.
Bear in mind that valuation could be a risk. With a forecast price-to-earnings ratio of 30, it’s not cheap. As such, its share price could be vulnerable in the short term.
That said, I would argue that quality businesses come at a price. And as a long-term investment, it’s a price I’m happy to pay.
Data is the new oil
Next, I’d buy FTSE 100 data business Experian (LSE:EXPN). This is another share that might be relatively unknown. That’s because 75% of its sales are business-to-business.
It collects, sorts, and analyses data from a range of sources. Then it sells it to banks and credit institutions to help them determine the riskiness of its customers.
The consumer side of the business offers a service that allows individuals to view their own credit reports.
The great thing about Experian’s business model is that it owns large databases with credit history data for over 1.3bn people. That creates a significant barrier for competitors.
Ticking my boxes
Another thing I like about Experian is its multi-year contracts and recurring revenue streams. This offers reliable and regular earnings.
Two metrics I look at to determine whether a stock is high quality are return on capital employed and profit margin. For Experian, both measures are above 20%, which puts a tick in the box for me.
Bear in mind that such a data-focussed business faces cybersecurity risks. Frequency of ransomware and email attacks continue to rise across the world. And Experian is not immune to these risks.
