The FTSE 100 may have slipped again in post-Easter trade, but markets have remained (on the whole) much calmer. Share investors are hoping that the worst of the stock market crash is over, and individuals’ appetite for picking up some choice bargains is improving.
A rise in Covid-19 infection rates, and some truly scary economic data means that stock pickers shouldn’t get complacent though. Another wild slide in global equity markets could be just around the corner. I’d still buy this dirt-cheap Footsie share however, on account of its brilliant long-term profits outlook.
Put it on The Pru
I bought shares in Prudential (LSE: PRU) at the top of the year. As you can imagine it hasn’t proved a fruitful purchase so far. As I type, its share price is down 30% from what I paid.
But I’m not perturbed by this reversal. For long-term investors like myself, such reversals are mere inconveniences rather than reasons to despair. I continue to believe that this FTSE 100 stock has a very bright future because of its growing influence in super-exciting Asia.
The Pru enjoyed another fruitful year in its Asian markets in 2019. Aggregated adjusted operating profits there soared 14% year-on-year and it’s investing heavily in its digital technologies, as well as bolstering its bank and agency channels.
Let me give you an example of the FTSE 100 share’s exceptional potential. Insurance penetration rates remain extremely low in Asia. According to Prudential, market penetration sits at around 2.7%, almost a full five percentage points lower than here in the UK. And a recent report from Swiss Re highlights just how big the Asian insurance market could potentially be.
It expects that Asia-Pacific nations will account for 42% of global premiums by the end of the decade. And by the mid-2030s China will become the world’s largest insurance market, it says.
A dirt-cheap FTSE 100 firecracker
Growing wealth and population levels in Asia should put Footsie-quoted Prudential on the road to great profits growth in the coming decades, then. But the insurer isn’t just a great play on Asia. Its Jackson unit in the US also gives it lots of headroom to generate big sales in what is currently the planet’s biggest retirement savings market.
As the company recently noted: “The continuing transition of millions of Americans into retirement creates a substantial opportunity for Jackson’s products.” It estimates that a whopping 4m US citizens reach retirement age every year.
Following that aforementioned share price weakness, Prudential now changes hands on a rock-bottom forward price-to-earnings (or P/E) ratio of 7.1 times. The FTSE 100 titan carries a chunky 3.5% dividend yield for 2020 too. The business has yet to publicly heed Bank of England advice for insurers to think carefully before paying out dividends. I reckon it’s a top buy for bargain hunters today.
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Royston Wild owns shares of Prudential. The Motley Fool UK has recommended Prudential. 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.