Across the FTSE 100, the recent market sell-off has created quite a few buying opportunities for investors looking to buy quality companies at a cheaper price. Three stand out to me.
FTSE 100 share with growth potential
Drinks giant Diageo (LSE: DGE) has seen its share price holding up in the past month or two. This year, the shares are down just a little over 20%. This compares well against the FTSE 100 overall.
This is because of the defensive nature of the shares. People are unlikely to cut back on booze spending, even during a pandemic. In fact, during March, both the US and UK saw alcohol sales increase. The downside obviously is restaurants, pubs and clubs won’t be buying alcohol in the foreseeable future.
Long term though, with strong brands, international reach and a strong balance sheet to weather the current storm I’m confident in Diageo’s prospects. Unlike newer drinks companies, it is not tied to any one type of drink. It has a broad range of drinks that appeal to people across the world. This makes it less reliant on current trends that may change.
Solid FTSE 100 performer
RELX (LSE: REL) is another company whose share price has been hit less hard by the market fall. The shares are down just 14%. That is a comparatively good performance. The provider of information-based analytics and decision tools for professional and business is unlikely to see demand for its products slip away.
Analysts at UBS have said the majority of RELX’s businesses were “not highly exposed to the effects of the coronavirus outbreak”, with the notable exception of its Reed Exhibitions division.
Reed Exhibitions accounted for £1,269m in revenues for the year ended 31 December 2019. Overall revenue at RELX was £7,874m over the year, meaning it isn’t reliant on the exhibitions part of the business to generate cash. This will be why the share price has been hit less hard than other conference companies. RELX is a steady FTSE 100 company, with plenty of long-term growth opportunities.
Battered share with recovery potential
WPP (LSE: WPP) shares have been hit hard during the market fall. A combination of its more cyclical nature (firms cut advertising during economic downturns), along with its own challenges, have created a combination that has sent the share price plummeting.
But I think that creates an opportunity either for a turnaround or a takeover, which may be at a premium to the current share price. That is especially so considering how far the shares have fallen recently.
Looking first at the takeover potential, Bain Capital has just taken Kantar off WPP’s hands for $4bn. It could be a contender to buy the whole group. As could a range of competitors or private equity firms with cash waiting to be spent.
Looking at what WPP management is doing now to save up to £800m, the divided is being axed, executive pay cut, hiring frozen and it is stopping all non-urgent spending.
I think the battered shares have recovery potential once the virus subsides.
Andy Ross owns shares in Diageo and WPP. The Motley Fool UK has recommended Diageo and RELX. 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.