FTSE 100 incumbent Prudential (LSE:PRU) has seen its share fall by over 30% in the past 12 months. What’s caused this and could now be a good time to buy cheaper shares for my holdings? Let’s take a closer look.
Financial services business
As a quick reminder, Prudential is an insurance provider that also sells other financial services products. Its roots stretch back over 170 years.
So what’s been happening with the Prudential share price? Well, as I write, the shares are trading for 1,015p. At this time last year, the shares were trading for 1,515p, which is a 33% decrease over a 12-month period.
I believe the Prudential share price has come under pressure from its demerger from fellow FTSE 100 incumbent M&G. In addition to this, the shares have also suffered due to the effects of the pandemic in the past two years. More recently, the financial sector has come under pressure due to macroeconomic headwinds such as soaring inflation worldwide.
A FTSE 100 stock with risks
Prudential’s restructure and renewed focus since the demerger could be a risky move, in my opinion, and one that could affect performance and investment viability moving forward.
It has decided to focus on developing countries and economies from a financial services and life insurance perspective. The uptake in such economies, of life insurance policies especially, is relatively low. In the current economic climate, it could be faced with volatile markets and performance could be affected. This could in turn, affect performance and investment viability.
The bull case
As much as there is a shorter-term risk to Prudential’s new focus mentioned above, I sense there is an element of excitement too. For example, there is a consensus that the Asian life insurance market could be worth a hefty trillion dollars. If Prudential were able to capture a slice of that pie, it could boost performance and returns in the longer term.
What about Prudential shares currently? Due to the share price drop, they look good value for money on a price-to-earnings ratio of just 15. The FTSE 100 average ratio is also 15.
Prudential’s history and track record of performance is also a positive factor for me. I do understand that the past is not a guarantee of the future, however. The fact it has operated for over 170 years is no small feat. It has consistently managed to grow, perform, and navigate tough times such as geopolitical issues like world wars and recessions. This tells me it could arrive on the other side of current issues in a decent position.
A FTSE 100 stock I’d buy
I would add Prudential shares to my holdings at current levels. The shares look good value for money, especially since they have been fallen in recent times.
My investment mantra is to buy and hold for the long term. This is why Prudential shares could fit well into my holdings.
I am buoyed by Prudential’s track record and despite the short-term challenges ahead, it could see performance boosted significantly. This would be based on its ability to capture emerging economies market share in the longer-term future ahead.