Value investors looking for stocks to buy in March should check out Informa (LSE:INF). The share price is down 10% Monday morning (2 March), but I’m sensing an opportunity.
The stock looked reasonably attractive to me even more today’s move. But a big drop means it’s jumped the queue to the top of my ‘to-buy’ list for this month.
Iran disruption
Military strikes in Iran from the US and Israel have jolted the stock market this morning and share prices are going in different directions. And Informa is one of the casualties.
One of the biggest reasons for this is oil, with Iran one of the largest global producers. But Informa isn’t a major consumer and that’s not why the stock’s falling.
The FTSE 100 firm is in the trade show business. And while it doesn’t have operations in Iran, it has been focusing on growth in the Middle East – specifically in Dubai and Riyadh.
Political unrest in the region can therefore be a major source of disruption. As a result, the stock’s falling due to the heightened instability.
Joint venture
As of this year, Informa has a huge joint venture with the Dubai World Trade Centre. This combines some of each company’s strongest assets into a powerhouse of a business.
The plan is to launch this onto the stock market in the second half of the year. But political instability in the Middle East could make that very bad timing.
To say this is important for the FTSE 100 company is an understatement (the CEO even relocated to Dubai last year to oversee the operation).
In response however, Informa has announced plans to advance its £200m share buyback. And with the stock falling, I think it could be a good time to consider a similar move.
Quality
From an investment perspective, I think Informa’s one of the FTSE 100’s most attractive companies. Its trade shows are industry-leading events that are a crucial part of the calendar for a number of businesses.
The economics of these are also very attractive for the firm. They don’t have the maintenance costs associated with owning venues, making them highly cash-generative.
A 10% decline in a day means Informa’s market value is now below £10bn. And I think that’s fundamentally cheap for a business that made £700m in free cash last year.
Investors should expect ups and downs. But the company has a lot of unique strengths that are likely to prove hard to disrupt over the long term and that makes it attractive for investors.
Opportunity
There’s a lot to think about in the Middle East at the moment, for reasons that go far beyond investing. But the stock market – naturally – has its eyes on the implications for businesses.
I’ve been looking for an opportunity to add to my investment in Informa for some time. And I think the share price falling in response to the latest disruption might be it.
Instability could affect the firm’s immediate plans. But the stock looks extremely good value to me, so it’s just jumped to the top of my ‘to-buy’ list for this month.
