Due to certain geopolitical and macroeconomic factors, some FTSE 100 stocks have fallen recently. Even before this price drop, some of these stocks were on my radar. One pick is Experian (LSE:EXPN). Here’s why I’d add the shares to my holdings.
Data is king
Experian is a global business services company that is best known for its credit checking operations. These enable consumers to identify and help manage their credit scores. I use Experian myself for this exact purpose.
Due to the pandemic, the explosion of online activity and e-commerce has meant the amount of data firms like Experian hold has been grown even further.
As I write, Experian shares are trading for 2,946p. At this time last year, the shares were trading for 2,565p, which is a 12% return over a 12-month period. The shares have dipped recently from 3,667p at the end of December to current levels. This is a 19% drop, which makes shares even more attractive right now.
Potential pitfalls
The competition in Experian’s market is intense. There are many services out there for consumers to be able to check their credit score. All these firms are vying for market dominance. If one of these were to get ahead of Experian, it could hurt performance and shareholder returns.
Tech stocks have recently been on a downward trajectory. These stocks have been falling on the FTSE 100 and other worldwide indexes. Due to current macroeconomic issues, many investors are selling high-growth tech stocks and looking to buy value and defensive stocks. Experian could see its shares fall even further yet, hurting investment viability.
A FTSE 100 stock I’d buy and hold
Data has been called the oil of the 21st century and firms that are able to capture, analyse, and capitalise on it are being compared to oil firms of the last century. Experian has a great reputation within its industry and an excellent profile backed up by some savvy marketing. Most importantly in this day and age, it has managed to steer clear of any data-related scandals that have tarred other firms reputation and balance sheet. Experian’s profile and brand are a big plus for me.
Experian has an excellent track record of performance, although I understand that past performance is not a guarantee of the future. I can see that revenue and gross profit have increased year on year for the past four years. Coming up to date, a Q3 report released last month made for good reading. Experian noted that Q3 performance was at the “upper end of expectations”. This led to a full-year forecast of revenue growth between 16% and 17%.
Experian also pays a dividend, which would make me a passive income too. In fact, last month, it confirmed its first interim dividend of $0.16 cents. Its dividend yield is still below the FTSE 100 average of 3%, however.
Overall I think Experian shares could be a good buy for my holdings, especially at current levels. Its position in the market, profile and brand, as well as performance, growth levels to date, and growth potential are exciting for me. I will keep a keen eye on developments and look forward to full-year results in the next few months.
Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Experian. 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.
