Investing £5,000 in FTSE 100 stocks after the recent market crash might appear to be a risky bet. Indeed, the outlook for the global economy is highly uncertain. However, the sell-off may have produced a number of buying opportunities for long term investors, especially in the FTSE 100.
As such, now could be a great time to build a portfolio of undervalued FTSE 100 growth shares. These companies may not produce high returns over the short run, due to the economy’s bleak outlook. Nevertheless, they may offer attractive growth prospects over the coming years.
FTSE 100 growth champion
Safety equipment manufacturer Halma (LSE: HLMA) is one of the best-positioned companies in the FTSE 100 to cope with the new normal after coronavirus.
The company is working flat out to meet the rising demand for safety equipment. Halma’s businesses around the world were already big suppliers to healthcare facilities. This diversification is helping the group weather the current crisis.
It’s manufacturing items such as components for ventilators and respiratory health devices and sensors to help make workplaces contact-free. Demand for this kind of equipment has increased dramatically in recent months. It’s unlikely to decline until the coronavirus crisis is fully contained.
That said, there are no guarantees Halma will continue to pay its dividend during the current crisis. Nonetheless, the group has an excellent track record of buying and integrating new businesses. This may mean investors will continue to see substantial capital gains over the long run as earnings expand.
Considering all of the above, Halma’s business model may prove to be more resilient than many FTSE 100 stocks. Therefore, the stock may produce a relatively stable total return in the coming years.
Another FTSE 100 share that could deliver improving performance over the next few years is the London Stock Exchange (LSE: LSE).
While many companies are already suffering falling demand from the coronavirus crisis, the LSE seems to be benefitting from market uncertainty. According to its recent trading update, total income rose 13% year-on-year during the first quarter. This was driven by “increased equity trading in capital markets.“
This increased level of activity won’t last forward, but the FTSE 100 champion has many strings to its bow. The company is also one of the world’s largest financial data providers. It also helps clear trades — making sure buyers and sellers receive the money they’re promised — a tedious but lucrative business.
As one of the largest clearing businesses in the world, the LSE can achieve profit margins just not available to competitors.
This diversified business model, coupled with the LSE’s size, suggests its long-term profit growth potential appears to be relatively attractive. As such, now could be an excellent time for investors to make the most of recent market volatility and snap up a share of the business after its recent decline.
Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Halma. 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.