While the FTSE 100 has largely held its own, individual share prices of some of the UK’s biggest companies have crashed since the beginning of 2022.
I’m delighted! Let me explain why.
Opportunity knocks
One of the great things about being a Foolish investor is that I can take a long-term view of stocks. I don’t need to worry too much about, say, the latest scandal at Downing Street, or a possible military conflict in Eastern Europe. That’s because I’m looking to grow my wealth slowly but surely over the years. Today’s headlines are tomorrow’s fish and chips wrapper.
Nor do I need to fixate on the quarterly or annual performance of my portfolio. Knowing the equities have consistently shown themselves to be the most lucrative asset I can own over decades is enough.
Contrast this attitude with that of the typical professional investor. They know that underperforming a benchmark (the FTSE 100 in many cases) for too long could put their job at risk. As a result, they can be forced to move out of underperforming stocks, regardless of their overall quality.
One example of this, in my opinion, is health & safety equipment maker Halma (LSE: HLMA). As I type, its shares are down 22% in 2022. This looks like a great buying opportunity to me.
Quality FTSE 100 stock
I certainly don’t think there can be any doubt over whether Halma is a good company. For years now, the business has been steadily growing revenue and profits. And given no client wants to be seen to be compromising the safety of its employees, or bypassing regulations, I have no doubt this will continue for many years to come.
Halma is also in a strong financial position. Having barely any debt on its books should mean that the £9bn-cap can continue acquiring smaller enterprises and throwing cash at research & development.
While perhaps of less importance for the committed growth investor, it’s also worth pointing out that Halma’s history of increasing its dividends is second to none.
Although cash payouts are never guaranteed, I don’t know of many other FTSE 100 stocks that have increased their cash payouts by 5% or more in 42 consecutive years. Considering just how many challenges the UK stock market has faced over this period, that’s got to count for a lot.
Time to buy?
Despite falling so far, Halma’s shares still change hands for 38 times forecast FY22 earnings. That’s a rich valuation in anyone’s book. It is however, significantly lower than when I last looked at the company in November 2021. Back then, this FTSE 100 member’s P/E stood at nearly 50!
The fact that I was a prospective buyer even back then shows how highly I regard this business. Now that things have fallen back despite no negative news being released, I think it could be time for me to back up the truck.
Of course, the shares could get even cheaper as we progress through 2022 if the rotation into value stocks continues. Indeed, this is why holding a diversified portfolio of stocks remains vital.
But quality stocks are rarely without friends for long. If ever there was a FTSE 100 firm where a 20% drop in its share price should be celebrated by long-term investors like me, it’s this one.
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Paul Summers has no position in any of the shares 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.
