The FTSE 100 has climbed 15% in November, and some stocks have made spectacular gains. International Consolidated Airlines has been the biggest blue-chip beneficiary of the month’s encouraging news on Covid-19 vaccines. Its shares have soared over 80%.
Today though, I want to highlight three FTSE 100 stocks that have been left behind by the market rally. I think they’ve excellent long-term growth prospects, and look very buyable at their current prices.
This FTSE 100 stock is down 5% in November
Halma (LSE: HLMA) owns high-margin niche businesses in the safety, medical and environmental fields. It’s a global group, with market-leading products and systems, and enjoys a structural tailwind of increasing regulation. I think it can continue its long record of organic growth and astute, bolt-on acquisitions.
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After getting to grips with the operational challenges posed by Covid-19, Halma has seen a steadily improving trading performance. Last week, management said it expects a 5% decline in pre-tax profit this year, an improvement on its initial estimate of 5-10%. Despite this, the shares are down 5% since the start of the month.
Ordinarily, I’d shy away from a rating as high as Halma’s 40 times this year’s forecasts earnings. However, I expect a strong earnings recovery next year. Furthermore, the company’s balance sheet has substantial capacity for earnings-enhancing acquisitions in what could be a particularly fertile period of opportunity, due to the economic havoc wreaked by Covid-19.
Another FTSE 100 stock that’s fallen this month
Reckitt Benckiser (LSE: RB) is another strong blue-chip business whose shares have performed disappointingly in November, despite the company upgrading its guidance on full-year trading.
In the latter part of October, management raised its expectations for like-for-like net revenue growth from a high single digit to low double digits. Yet its shares have fallen 7% through November.
RB owns world-class consumer goods brands in hygiene, health and nutrition. The Covid-19 pandemic has led to particularly strong demand for its market-leading disinfectants, such as Dettol and Lysol. More importantly though, I see good progress on the new CEO’s plan for rejuvenating sustainable growth across the group.
After the recent decline in the share price, RB can be bought for less than 20 times forecast earnings. I think this is good value for a brands powerhouse with long-term global growth prospects.
A third November faller I’d buy today
Sage (LSE: SGE) is the global leader in providing accounting technology and support to small- and medium-sized businesses. The company has been transitioning to cloud-based systems and a subscription model.
Arguably, previous management could have spotted the trend towards this way of operating sooner that it did. However, the current CEO has accelerated the transition, and is sacrificing some profit margin in the short-term to complete it.
In last week’s annual results, the company reported an organic operating margin of 22.1%. This was down from 23.8% the previous year. Management advised that further additional investment in the current year could take the margin down as low as 19%. However, it then expects margins to trend upwards over time, as the investment drives recurring revenue growth and operating efficiencies.
Sage’s shares are down 9% in November. I think this is another FTSE 100 stock that could deliver impressive long-term returns for investors from a rating of around 20 times earnings. In an article earlier today, my colleague Roland Head explained in detail why he may well invest in the business.
