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Some FTSE 100 stocks I’d buy (and one I’d avoid) in this market crash

World markets have been so volatile that company valuations and prospects (in the near term at least) are changing on an almost daily basis.

Many lowly-rated FTSE 100 stocks have got even cheaper. Meanwhile, a number of blue-chips I previously felt were too richly valued are now trading at what I believe are buyable levels. But there are also stocks across the spectrum where I still see material downside risk.

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I’ve used the weekend to review the state of play at some of my favoured super-cheap stocks and buyable higher-valued businesses, as well as at some of those that have so far remained on my avoid list. Here’s my take on a number of these stocks.

Super-cheap stocks

The travel and leisure sector has been extremely hard hit by the impact of the spread of Covid-19. Budget airline easyJet‘s shares have crashed 48%, while cruise ship operator Carnival‘s have sunk 61%. Both are trading at single-digit P/Es on their historic earnings. However, it’s all about near-term survival right now.

I’ve been positive on these two stocks based on a few simple metrics pointing to their relatively strong balance sheets and liquidity. Having caught up on recent more sophisticated assessments by better-resourced and smarter analysts than me, I’m heartened to maintain my view of easyJet and Carnival as long-term ‘buys’ with high-reward potential.

Buyable higher-valued businesses

The new low point of the market crash on Thursday brought several highly-valued blue-chips into my buyable zone. Notably, Rightmove (share price 516p, forward P/E 23.5), Experian (2,145p, 23.5), Hargreaves Lansdown (1,211p, 20.0), and Sage (560p, 18.2).

Despite rallies of up to 9% on Friday, these four remain ‘buys’ for me at their somewhat higher end-of-week valuations: Rightmove (537p, 24.5), Experian (2,145p, 24.1), Hargreaves Lansdown (1,320p, 21.8), and Sage (582p, 18.9).

Triple whammy of downside risk

AstraZeneca is one FTSE 100 stock, whose share price hasn’t fallen far enough to attract me, as I explained in a recent article. Scottish Mortgage Trust (LSE: SMT) is another, as I’ll explain here.

The most recent factsheet from SMT shows its top 10 holdings at 31 January. Tech-based NASDAQ-listed companies are prominent: Tesla (10.3% of the portfolio), Amazon (8.6%), Illumina (5.9%) and Netflix (2.5%). China tech giants Alibaba (6.2%) and Tencent (5.8%) are also in there. The top 10 stocks account for 52% of the portfolio.

As you can see below, the trust has performed relatively well between 31 January and 12 March — the latest date of its published net asset vale (NAV).

 

31 January

12 March

Change

NAV

586.67p

524.76p

-10.6%

Share price (& discount to NAV)

581p (1.0%)

513p (2.2%)

-11.7%

Top 10 holdings weighted average

-16.2%

The share price has fallen a little more than NAV, with the discount modestly widening from 1% to 2.2%. But what are we to make of the much greater fall (-16.2%, as I’ve calculated it) of the top 10 holdings?

A weakening of sterling against the dollar likely accounts for part of it. However, I also suspect there’s been no revaluation of SMT’s sizeable unlisted investments (19.4% of the portfolio at 31 January). As a rule, valuations of these are only reviewed every quarter.

I see a triple whammy of downside risk. That includes a hefty de-rating by the market of many of SMT’s still-heroically-valued listed stocks like Tesla, write-downs of the valuations of its unlisted investments (due to the fall in the values of listed benchmark comparators), and the share price moving to a much wider discount to NAV. One to avoid for now, I feel.

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G A Chester has no position in any of the shares mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alibaba Group Holding Ltd., Amazon, Netflix, and Tesla. The Motley Fool UK has recommended AstraZeneca, Carnival, Experian, Hargreaves Lansdown, Rightmove, and Sage Group. 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.