Right at the end of 2019, I took a look at Halma (LSE: HLMA) when I asked “can these 2019 FTSE 100 winners continue surging in 2020?” That was just a couple of short months before the Covid-19 pandemic put the skids under countless growth stock prospects. And sent the FTSE 100 plunging.
But since then, Halma actually hasn’t done so bad overall. The Halma share price did dip in the early lockdown days, but by a lot less than the index. And since that bottom, Halma has put in one of the best FTSE 100 growth stock recoveries. Halma shares are now up 5% in 2020, while the Footsie itself is still down 20%.
Trading update
Halma provides a whole range of products related to health and safety. And there’s certainly been demand in that area so far this year. In a trading update on 23 September, the company told us it has “delivered a resilient performance” for the period from 1 April up until now. And it said that “despite the operational challenges arising from the Covid-19 pandemic, the group has continued to benefit from the long-term growth drivers in its markets.”
Revenue fell 13% in the first quarter. But since then, order intake and revenue have been improving. Halma says it expects its full-year adjusted pre-tax profit to come in around 5% to 10% below the figure for March 2020. Profit should be weighted more towards the second half than in previous years, not really surprising considering the events of 2020.
A FTSE 100 defensive growth stock
Halma has, no doubt, benefited from the so-called flight to safety that’s been triggered by the stock market crash. But Halma is different from the usual defensive FTSE 100 stocks in one key way, in my view. It also has tremendous long-term growth potential. And I think that’s a phenomenal combination.
Talking of defensive investing, I can’t help seeing it as a mistake right now. I’ve never really understood the point of switching away from riskier growth stocks after a crash. Or buying into defensive stocks after a market shock has pushed them higher. Saying that, I am a strong proponent of investing defensively. I think every investor should keep Warren Buffett’s first rule at the front of their mind: never lose money.
Portfolio balance
The best time to buy defensive FTSE 100 stocks is before a crash, and there’s only one way to do that. Unless you’re any good at accurately predicting the market (which, let me tell you, you’re not), the way to do it is to always invest in defensive stocks. That doesn’t mean never buying a growth stock. No, not a bit. But the older I get, the more I see success in getting the balance right.
Anyway, back to the subject of this piece. Halma shares are highly valued. But I think that’s fair, given the combination of defensive characteristics and those long-term growth drivers. I’d buy.
