FTSE 100 reshuffle: Should you buy these 2 new inclusions?

Highlights 

• FTSE100, which includes the top 100 high market cap companies, recently completed its quarterly review of the index.
• Eat Takeaway.com and Weir Group Plc made their way out, while Meggitt Plc and Morrison Supermarkets Plc made their entry to the blue-chip index.
• Rule-based quarterly review of the index ensures FTSE100 represent a true reflection of the stock market.

FTSE Russell, one of the leading global benchmark index providers, has completed its quarterly review of the blue-chip FTSE100 index. As per the latest reshuffling Just Eat Takeaway.com and Weir Group Plc would be excluded from the main index and will be replaced by Meggitt Plc and Wm. Morrison Supermarkets Plc.

FTSE100 index, which includes the top 100 high market cap companies listed on the London Stock Exchange, does a rule-based quarterly review to ensure FTSE100 represent a true reflection of the stock market and hence index can be used efficiently by individuals to track the stock market and as a benchmark by the mutual funds to track investment return.

Let us look at the stocks that got included in the FTSE100 index and explore if they are a good investment opportunity.

                                                                  Copyright © 2021 Kalkine Media

Meggitt Plc (LON: MGGT)

The company engages in the design and manufacturing of aerospace and defence components. It has operations in the United Kingdom, the US and Europe.

The company operates in the niche segment of aerospace and defence equipment, which has very few competitors. The company reported total revenue of £680 million for the period ended 30 June 2021, while its gross profit stands at 197.4 million. It also reported a higher EBITDA margin of 69.4% and a net margin of 4.2% during the period.

The company has received a USD 8.76 billion acquisition bid from the US-based Parker Hannifin Corp., which the company’s board has approved and has also recommended same to the shareholders. Parker Hannifin Corp. and Meggitt Plc both operate in the same segment, and the proposed acquisition of Meggitt Plc could nearly double the aerospace business revenue of Parker Hannifin Corp.

ImageSource: Refinitiv

Inclusion in the blue-chip index FTSE100 is likely to benefit Meggitt Plc. Its shares are trading at GBX 833.60, up by 0.44% at 13:51 PM. The current market cap stands at £6,485 million as of 2 September 2021. In one year, the stock has returned over 206%.

Related Read: What led Meggitt Plc (LON:MGGT) and FTSE 250 to hit record high?

Morrison (WM) Supermarket Plc (LON: MRW)

The UK-based company operates over 500 supermarket stores across UK, Scotland and Wales. The company has over 10% market share in the UK retail market.

The company’s sales received a significant boost during the pandemic period as people were bound to cook at home due to lockdown and work from home scenarios. The segment in which the company operates is daily basic essential products, which people are going to buy irrespective of pandemic, and the company’s revenue will keep growing at a constant pace.

The stock could see further buying from the institutional investors following its inclusion in the FTSE100 as the investors look to align the fund with the benchmark index.    

The supermarket chain operator saw a bidding war for its takeover between two US-based private equity firms. The company’s board agreed to a bid from private equity group CD&R.

Image Source: Refinitiv

Morrison (WM) Supermarket Plc’s is trading at GBX 286.60, up by 0.28%. The current market cap stands at £6,986 million as of 2 September 2021, and it has given over 52% return in the last one year.