I’ve just bought more of this sinking FTSE 100 share! Here’s why

Looking for long-term share price gains and dividend growth? Check out this FTSE 100 share our writer’s bought in recent days.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Investor looking at stock graph on a tablet with their finger hovering over the Buy button

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Ashtead Group‘s (LSE:AHT) the largest holding in my portfolio. I own more of its shares than any other FTSE 100 share including Legal & General, Diageo and Aviva.

But despite my substantial holdings, Ashtead’s recent share price slide was too significant for me not to act on. Like Warren Buffett, I love buying quality stocks when they’re marked down.

Here’s why I’m a huge fan of this fallen Footsie hero.

Should you invest £1,000 in BAE Systems right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BAE Systems made the list?

See the 6 stocks

Under pressure

Created with Highcharts 11.4.3Ashtead Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

In truth, things have been pretty miserable at the rental equipment provider of late. This month it slashed its profit estimates for the fourth time in just five quarters.

Downgrades are always hard for the market to swallow. They’re especially shocking when they come from with impressive records of upgrading their forecasts, like Ashtead has had in the past.

Weak conditions in North America are deeply impacting the performance of its Sunbelt brand. This month, Ashtead said that “local construction markets have been affected by the prolonged higher interest rate environment” and that pre-tax profit dropped 4% in the six months to October.

The group sources more than 90% of revenues from the US, so weakness here’s a big deal. As a consequence, rental revenue growth estimates were slashed to 3% from 5% for the full year. This is down from 5% to 8% previously.

Oversold?

Some share price weakness was understandable following mid-December’s update. But the scale of the decline was hard for me to fathom. Between the statement’s release and me increasing my stake on Wednesday (16 December), Ashtead’s share price dropped a whopping 18%.

My decision to buy more stock may haunt me if business remains slow. But as a patient investor, I’m prepared to suck up a little bit of pain for the possibility of long-term gain.

20.1% return

Over this sort of timescale, I’m optimistic my Ashtead shares will prove an excellent investment.

I’ve already enjoyed fine returns since I first bought its shares in April 2020. Back then, Ashtead was valued at £23.33 per share, considerably lower than the price of £51.23 than the stock’s valued at today.

Combining share price gains and dividends since I opened my position, I’ve enjoyed an average annual return of 20.1%. That’s more than three times the FTSE 100 average of 6%.

Bright future

Past performance isn’t a reliable guide to future returns. But I’m confident Ashtead can keep delivering stunning returns as it successful expansion strategy rolls on.

From a market share of 6% back in 2014, its take of the US market now stands at 11%. With the rentals market still highly fragmented, the business has substantial scope to embark on further profit-boosting acquisitions.

On top of this, Sunbelt’s revenues could sharply improve from this point as interest rate cuts boost the construction sector. They’ll also benefit from a steady stream of US mega-projects coming online, an area in which Ashtead’s scale makes it a major player.

Following their recent drop, Ashtead shares now trade on a forward price-to-earnings (P/E) ratio of 17.1 times. I think that’s a bargain for a stock of this calibre and is worth considering.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

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.

Royston Wild has positions in Ashtead Group Plc, Aviva Plc, Diageo Plc, and Legal & General Group Plc. The Motley Fool UK has recommended Ashtead Group Plc and Diageo 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.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Around a 1-year high, is there enough value left in Next’s share price to make it worth me buying?

Next’s share price has risen a lot in eight months, but there could still be a lot of value left…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

OMG DYOR but IMO this ‘cool’ FTSE 100 stock offers bangin’ VFM!

Despite being one of the least trendy 50-somethings around, our writer considers how Gen Z could help push this FTSE…

Read more »

Investing Articles

2 cheap FTSE 100 and FTSE 250 growth stocks to consider as stock markets sink

I think these Footsie and FTSE 250 growth shares could be very shrewd buys to consider in the current climate.…

Read more »

Investing Articles

3 shares I’ve bought in the 2025 stock market sell-off

The stock market has experienced a lot of turbulence in recent weeks. Edward Sheldon has been taking advantage and buying…

Read more »

Investing Articles

Investors considering HSBC shares could aim for £8,453 a year in passive income from just £5 a day!

A relatively small daily investment in HSBC shares over several years can produce an extraordinary level of annual passive income…

Read more »

Investing Articles

The Rolls-Royce share price has fallen! Is this the moment investors have been waiting for?

Even the Rolls-Royce share price can't escape current stock market volatility, falling slightly over the last week. Should investors consider…

Read more »

Modern suburban family houses with car on driveway
Investing Articles

Down 59% from its 12-month highs, is this FTSE 250 stock too cheap to ignore?

Shares in FTSE 250 housebuilder Vistry are almost certainly too cheap to ignore. But are they discounted enough to offset…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

As the S&P 500 struggles to recover, here’s what Warren Buffett’s doing

The S&P 500 is fighting to regain its February highs amid ongoing trade tariff uncertainty. Our writer looks to the…

Read more »