We’re all looking for FTSE 100 bargains in the stock market crash. For many, that means going for shares that have fallen and that we think are now oversold. But not all top stocks have fallen in price, and I think there are good buys to be found among those that are holding up.
My first pick is Segro (LSE: SGRO), with a share price that’s up 3.7% in 2020. Segro is a real estate investment trust (REIT). I’ve always been a big fan of investment trusts, and I see long-term value in the commercial property market. For those of us who can’t afford to buy our own warehouse or shopping centre, a REIT can provide a way in. And it can provide a degree of diversification too.
The company has just released a Q3 trading update. Chief executive David Sleath spoke of “further demand for our asset class from both customers and investors, outweighing any negative economic impacts from the pandemic“.
The FTSE 100 company has signed contracts in the period with an additional £15.8m in headline rent. As a result, the firm is ahead of the same period a year ago, and it takes the nine-month total to £49.6m. In these tough times, I see vacancies in commercial properties as a significant risk. But Segro’s vacancy rate looks acceptably low and stable at 5.2%, the same as a year ago. The firm puts its customer retention rate at 88%.
On the same day, Segro announced the acquisition of a new warehouse estate in Canning Town, for £133m. I think these are good times to be looking for real estate bargains like this.
At 30 June, Segro reported a net asset value per share of 718p. And with the share price at 930p as I write, that’s a 30% premium. I’m happy with that, and I rate Segro as a FTSE 100 pick for growth and income potential.
Another FTSE 100 buy?
For my second selection, I’m looking at Avast (LSE: AVST). Avast is a FTSE 100 cybersecurity company, and the Covid-19 pandemic seems unlikely to damage that business. As a result, if anything, the increase in business being conducted online is more likely to give Avast a boost. The company’s pandemic resilience shows in its share price, up 10% so far this year.
A third-quarter update Wednesday reported an 8.6% rise in organic revenue for the period, to $226m. That excludes acquisitions, disposals, and discontinued businesses, and reported revenue including those increased by a more modest 2.6%. For the year to date, reported revenue grew by 1.9% with organic revenue up 7.3%. In terms of profit, adjusted EBITDA for the quarter is up 3.3%, with a year-to-date figure up 2.5%.
The idea that cash is king has been reinforced strongly by the FTSE 100’s troubles in 2020. Because of that, I like to see debt reducing. And Avast looks to be doing well. The company told us that “continued strong organic cash flow generation helped accelerate deleveraging and enabled the voluntary repayment of $100m debt in the third quarter“. Net debt stands at 1.5 times adjusted EBIDTA, which looks comfortable to me.
I have Avast on my list of potential growth buys, and I see long-term dividend prospects too.
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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.