1 FTSE 100 share I’d buy in this market crash

This FTSE 100 looks well placed to pull through the current economic situation in one piece and come out stronger on the other side.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

RISK WARNING: should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice. The Motley Fool believes in building wealth through long-term investing and so we do not promote or encourage high-risk activities including day trading, CFDs, spread betting, cryptocurrencies, and forex. Where we promote an affiliate partner’s brokerage products, these are focused on the trading of readily releasable securities.

If I had to pick just one FTSE 100 share to own in the current market crash, I’d choose Halma (LSE: HLMA).

Shares in the company have not been able to escape the sell-off. The stock is off 18.5% from its 52-week high printed back in the middle of February.

However, the stock is down just 11% since the beginning of the year. That’s a relatively insignificant decline compared to the FTSE All Share’s 30% slump.

Market crash resilience 

Halma has outperformed in the market crash because the business provides a critical service. It manufactures and distributes a range of protective equipment for the medical and construction sectors, among others.

The business hasn’t been able to escape the current virus outbreak. However, the impact on operations has, so far, been manageable. 

According to its most recent trading update, adjusted earnings for the financial year ending 31 March 2020 will come in slightly below expectations.

The company is forecasting profit before tax for the year ending to be in a range of approximately £265m to £270m. The City was expecting adjusted earnings of £275m.

Still, in the same update, management revealed that order intake and revenue is currently running ahead of last year’s figure. That suggests that the impact of the coronavirus outbreak on Halma’s operations will be minimal. 

What’s more, the company’s financial position is robust. It still has 40% left of a £750m revolving credit facility to fund operations if profits evaporate. Considering management’s recent comments, this doesn’t look likely. These numbers suggest the business has plenty of capital to survive the market crash. 

Buy and build 

As well as organic growth, Halma has historically followed a buy and build strategy. Last year the group completed 10 acquisitions to bolster growth. The company has the capacity to complete more deals over the next 12 months as well. 

Halma is in a position of strength in the market crash — at a time when many other companies are struggling. This could present a once-in-a-decade opportunity for management to snap up a range of smaller businesses at attractive prices. These deals could help turbocharge the group’s growth over the next decade.

Dividend safety 

All of the above suggest that Halma’s dividend is safe for the time being. The stock currently supports a dividend yield of 0.9%. At a time when many blue-chip companies are cutting their distributions, this looks attractive. It is also attractive considering the current interest rate environment.

Unfortunately, shares in Halma don’t come cheap. The stock is currently trading at a price-to-earnings (P/E) ratio of 32. That’s around three times higher than the rest of the market.

Nevertheless, considering the group’s defensive nature, it could be a price worth paying to buy a defensive business in this market crash. 

Moreover, for the past six years, Halma has managed to achieve an earnings growth rate of 15% per annum. If the company can repeat this performance during the next six years, earnings will double every five years. That implies investors are paying a 2030 P/E of just 10. On that basis, the stock looks to be good value at current levels.

RISK WARNING: should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice. The Motley Fool believes in building wealth through long-term investing and so we do not promote or encourage high-risk activities including day trading, CFDs, spread betting, cryptocurrencies, and forex. Where we promote an affiliate partner’s brokerage products, these are focused on the trading of readily releasable securities.

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.

More on Investing Articles

Investing Articles

Publish Test

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut…

Read more »

Investing Articles

JP P-Press Update Test

Read more »

Investing Articles

JP Test as Author

Test content.

Read more »

Investing Articles

KM Test Post 2

Read more »

Investing Articles

JP Test PP Status

Test content. Test headline

Read more »

Investing Articles

KM Test Post

This is my content.

Read more »

Investing Articles

JP Tag Test

Read more »

Investing Articles

Testing testing one two three

Sample paragraph here, testing, test duplicate

Read more »