Major global stock markets have been shaken amid mounting concerns over the US economy. In the UK, the FTSE 100 and FTSE 250 have stabilised in recent days, but investor confidence is fragile and another plunge could be around the corner.
This doesn’t much worry me however. Like billionaire investment guru Warren Buffett, I buy shares with a view to holding them for the long haul, like five years or more. I’m confident that, over time, the stocks I’ve picked following careful research will recover over time, and then some.
A FTSE 100 bargain
In fact, as a patient investor, I welcome times of share market turbulence like this. “Whether we’re talking about stocks or socks, I like buying quality merchandise when it is marked down”, to quote Buffett. Falling stock markets boost my chances of digging out brilliant bargains.
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With this in mind, here’s a great Footsie share currently trading at knock-down prices. I’m aiming to buy it for my portfolio when I next have cash to invest.
Strong trading
Prudential‘s (LSE:PRU) share price continues to tumble as China’s economy splutters. Tough conditions in Asia’s economic powerhouse can have significant ramifications across all of ‘The Pru’s’ key markets.
I can’t help but feel however, that the FTSE 100 company’s shares are way, way too cheap right now. Today, they trade on a forward price-to-earnings (P/E) ratio of 8.4 times, some distance below the index average around 10.5 times.
I certainly don’t think Prudential shares warrant this rock-bottom rating in light of ongoing strength. Despite strong comparisons in Hong Kong and Mainland China during the first quarter, annual premium equivalent (APE) sales across the group rose 7% year on year, latest financials showed.
Long-term opportunity
Demand in its Asian marketplace continues to rise thanks to booming population and wealth levels. This is a trend that has much further to run, given that financial product penetration rates remain so low.
Analysts at Mordor Intelligence expect Asia’s life- and non-life insurance industries to grow at an annual rate of more than 4.5% over the five years leading up to 2029. This growth rate’s significantly higher than the projections for developed markets.
Reflecting this huge opportunity, Prudential has plans to grow new business profit at a compound annual rate of 15-20% between 2022 and 2027. It aims to do this by doubling-down on areas like agency, bancassurance and health, and investing heavily across the business.
85% upside?
Encouragingly, The Pru has a strong balance sheet it can utilise to help make these dreams a reality. Its free surplus ratio was 242% as of the end of 2023, and it’s targeting a ratio of 175-200% over the longer term.
As an added bonus for investors, its robust cash reserves also mean that dividend growth and share buybacks might accelerate. Indeed, the company announced a fresh $2bn share repurchase programme just a couple of months ago.
Sixteen analysts currently have ratings on Prudential shares. And they’ve assigned an average 12-month price target of £11.70, up 85% from current levels. I think now might be a great time for me to increase my stake in the company.
