With world stock markets having crashed this week, investors are faced with an array of discount share prices. Whether you’re looking mainly for high-income stocks or mainly for growth stocks, the UK’s FTSE 100 has them on offer.
Associated British Foods (LSE: ABF), Burberry (LSE: BRBY) and Prudential (LSE: PRU) are three companies I rate highly for their long-term growth prospects. Whatever the shorter-term impact on their businesses of the coronavirus, I’d happily buy these stocks today at their current knockdown prices. They’re trading at discounts to their 52-week highs of 13%, 29% and 24% respectively.
I’ve long been an admirer of Associated British Foods. The group has several food businesses, but the jewel in the crown is its value fashion chain, Primark. I expect Primark to continue to be ABF’s major growth engine for a long time to come. It’s already established in parts of Europe, but its expansion into the huge US market is only in its infancy.
Earlier this week, the company released a solid trading update, albeit noting it’s assessing mitigating strategies in the event of prolonged disruption from the coronavirus in China. A number of its food businesses have operations in China, and Primark sources a broad assortment of its product from the country.
As things stand, at a current share price of 2,360p, ABF’s forward price-to-earnings (P/E) ratio is 16, and the prospective dividend yield is 2.1%. The earnings multiple is low and the yield high by historical standards. As such, I reckon this is a great entry point for long-term investors.
Burberry is at the other end of the fashion pricing spectrum to Primark, but is a business I equally admire. The world can’t seem to get enough of its quintessential British heritage style.
China and the wider Asia Pacific region are important markets for the company. Business has been impacted by the political and social disruption in Hong Kong, and — per a 7 February update from the company — the coronavirus. However, I’ve no doubt BRBY’s business will thrive when the situation normalises.
Like ABF, it’s trading with a lower forward P/E (18) and higher dividend yield (2.8%) than it has done historically. So, again, I reckon this is a great opportunity for long-term investors, buying at a current share price of 1,660p.
Insurance giant Prudential completed a demerger, and separate stock market listing, of its UK business (M&G) last October. Such splits often deliver value for shareholders in the long run, and I think it was a good move.
Now, activist hedge fund Third Point is calling for company to separate its remaining businesses, Jackson National Life in the US and Prudential Corporation Asia. Again, I think this is logical and likely to be a good move. Third Point boss Daniel Loeb reckons shares in Prudential could double within three years if the businesses are split.
Prudential’s shares are currently trading at 1,325p. Its forward P/E is sub-10, and its prospective dividend yield is 2.4%. We haven’t heard from the company on any impact from the coronavirus on PruAsia, but I think the group’s long-term growth prospects in the region make the shares highly attractive at their current level.
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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods, Burberry, and Prudential. 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.
Motley Fool UK 2020