5 Investment Themes on FTSE 100 Index in the Phase of Pandemic

Stock market trading has usually been considered a risky affair, but the Coronavirus pandemic has made the very risky proposition, and London Stock Exchange has been no different. Since the time the virus was first noticed in China, several British companies had reported a reduction in their revenue guidance as they had significant exposure to that country. Over a period of time when the virus entered the United Kingdom, it created an unprecedented healthcare nightmarish situation in the country. The whole country has now been locked down, and the economy has come to a standstill. The current situation thus proves to be a very difficult trading environment for investors looking to take positions in stocks on the London Stock Exchange. There are, however, some ideas that are worth pondering and can be considered by investors to derive investment value even in these conditions. Today we are discussing five such ideas to look for prospective stocks from the FTSE 100 list that might come for some help to investors looking for a good deal.

1. Value picking – A market bottom situation like what we are witnessing right now gives an investor a rare opportunity to pick good stocks at relatively cheap prices. If he has done good research and is able to avoid the pitfalls of venturing into the markets in a situation like this, then he is in a position where he can build for himself a portfolio of stocks that could gain him excellent long term value creation. The stocks of good companies are available at discounted prices at these market conditions. This is however, not the time to trade for short term or speculative considerations. Given what the market conditions are, it is highly unlikely that the market will rise sharply. These market conditions are apt for investors who are looking for long term value creation. Investors who usually venture into such markets are value investors and make their purchase keeping in mind the long-term growth prospects of an underlying business rather than technical of the price movements. These market conditions provide the best opportunity to buy these stocks at such low prices which otherwise would not be possible under normal market conditions. Another most important thing also needs to be mentioned here, it is likely that after an investor has purchased a stock for the long term, it is likely that the prices could fall further, and this may prompt some to sell. It is to be remembered here that the downside potential in such market conditions is low compared to a market peak and an investor would do good holding on to a value stock rather than selling into a market panic. FTSE 100 in one of the best places where good value stocks can be found now.
2. Sectors who are performing relatively better – It is also prudent to look out for sectors who are giving relatively good performance during this period and who are least likely to be impacted by the downturn. It can be expected that these sectors will make an early turnaround, and the stocks will give a quicker return on the investors’ investments. Also, these sectors are more likely to be performing at least marginally, while the other sectors may be witnessing a severe downturn. It is likely that the companies belonging to these industries would not be performing as badly as the stock markets may be discounting them due to the impending momentum. This represents an even better investment opportunity to cash in on a known market imperfection that could improve more than proportionately when the conditions improve. Healthcare and online retailing are currently in the thick of activity, and many stocks of FTSE 100 list belonging to these sectors are worth watching out for.
3. Dividend stocks for a higher yield – It is the best time now for investors to scout for good stocks which have a long history of paying dividends. Investing now has a high chance for an investor looking for building a portfolio that would yield a high long-term dividend income. The best investment strategy one can adopt during times of economic turmoil like the current one. Companies having a good history of paying dividends are usually the ones having a strong underlying business. These companies enjoy good cash earnings over a strong revenue base. The stocks provide not only high safety but also a long term growth potential to a prospective investor. Also investing in stocks like these during difficult times gives the investor an opportunity to earn high dividend yields when better situations come to prevail. Sometimes investing in these stocks at highly discounted prices during difficult times give an investor to get a stable long-term dividend yield that may be higher than the one provided by many high yielding fixed income securities. FTSE 100 has a long list of companies who have a good history of paying good dividends
4. Companies with multinational revenue base – Another good option that can be explored, is to look out for stocks which have a wide revenue base, most preferably an international revenue base. Multinational companies operate in several geographies, and their risk are diversified that way. Under the current economic scenario when there is lockdown conditions in one country and limited movement or none in other countries a multinational firm will continue to churn revenues, while a purely domestic focused company will be making negligible or no revenues at all. In fact, the FTSE100 list is the best place where such companies can be found compared to its other cousin indices, where the strongest and well-rooted British multinational companies can be found.
5. Investment funds – Mutual fund and other such funds are investment vehicles which provide professional management to investors funds, thereby offering them safety and professional management. During difficult market conditions, these funds are also underperforming along with stocks that are part of these portfolios of funds. An investor will do good if he chooses to invest in these funds during these times. There is limited downside risk in investing in these funds in these testing times, whereas they have a high upside gain potential if invested in them now. Investing in these gives the investor the benefit of superior management skill when he does not have the required time and skillset to conduct his own research into the labyrinths of a stock market. There are several FTSE 100 focused funds that an investor can look into, in order to invest for the long term.

There are several other ideas also that can be considered in these times to pick investment decisions from the FTSE 100 list that can bring in great value creation for investors, however, the above five are the tested options and can be expected to be a good guide for astute investors.

Disclaimer

The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. The above article is NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) under discussion. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site.