Major global stock markets have faltered amid growing concerns about the US economy. In the UK FTSE100 And FTSE250 have stabilized in recent days, but investor confidence is fragile and a further collapse could be imminent.
That doesn’t worry me too much, though. Like billionaire investment guru Warren Buffett, I buy stocks with the intention of holding them for the long term, which is about five years or more. I’m confident that the stocks I’ve selected after careful research will recover over time, and then some.
A FTSE 100 bargain
In fact, as a patient investor, I welcome such turbulence on the stock markets.”Whether it’s stocks or socks, I like to buy quality goods when they are reduced in price“, to quote Buffett. Falling stock markets increase my chances of finding great bargains.
With that in mind, here’s a great Footsie share currently trading at knockdown prices that I plan to buy for my portfolio next time I have money to invest.
Strong trade
Regulatory(LSE:PRU) share price continues to tumble as China’s economy stumbles. Difficult conditions in Asia’s economic powerhouse may have a significant impact on all of PRU’s key markets.
However, I believe the FTSE 100 company’s shares are currently far, far too cheap. Today they trade at a price-to-earnings (P/E) ratio of 8.4, well below the index average of around 10.5.
I don’t think Prudential shares justify this rock-bottom valuation given their ongoing strength. Despite strong comparisons in Hong Kong and mainland China in the first quarter, annual premium equivalent sales (APE) for the entire group rose 7% year-on-year, the latest financials showed.
Long-term opportunity
Demand in the Asian market continues to grow thanks to the booming population and rising levels of prosperity. This trend is likely to continue as the penetration of financial products remains so low.
Analysts at Mordor Intelligence expect the life and non-life insurance industry in Asia to grow by over 4.5 percent annually in the five years to 2029. This growth rate is well above forecasts for developed markets.
Given this enormous opportunity, Prudential plans to grow profits from new business by an average of 15 to 20 percent annually between 2022 and 2027. This will be achieved by doubling activity in areas such as agency business, bancassurance and healthcare, as well as through massive investments across the company.
85% upside potential?
Fortunately, The Pru has a strong balance sheet that it can leverage to make these dreams a reality. Its free surplus ratio was 242% at the end of 2023 and it is targeting a ratio of 175-200% over the long term.
An added bonus for investors: The company’s solid cash reserves mean dividend growth and share buybacks could accelerate. In fact, just a few months ago, the company announced a new $2 billion share buyback program.
Sixteen analysts are currently covering Prudential shares. And they have set an average 12-month price target of £11.70, which is 85% above current levels. I think now could be a good time for me to increase my stake in the company.
The post “A bargain FTSE 100 share I’d buy without hesitation!” appeared first on The Motley Fool UK.
Further reading
Royston Wild has positions in Prudential Plc. The Motley Fool UK has recommended Prudential Plc. The views expressed on companies mentioned in this article are those of the author and may therefore 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.
Motley Fool UK 2024
