If I snapped my fingers right now and a load of FTSE 100 stocks disappeared forever, would anyone truly care? Would people even notice?
Naturally, that would depend on which underlying companies they were. I’d wager that betting apps might easily be replaced alongside some supermarkets. But a few firms would certainly be missed a lot.
According to investor David Gardner, co-founder of The Motley Fool, these companies pass the ‘snap test’.
For fans of the Marvel Universe, it’s like Thanos snapping his fingers, but with stocks. It can be a simple but powerful way to figure out if a company has a competitive advantage.
Here are three FTSE 100 stocks that I reckon easily pass the snap test.
AstraZeneca
First up is AstraZeneca (LSE: AZN), the FTSE 100’s second-largest firm by market cap.
The biopharmaceutical giant now has 12 blockbuster medicines (excluding Covid products) that exceed $1bn a year in sales. These include Lynparza and Tagrisso for ovarian and lung cancer, respectively.
Outside of oncology, it makes drugs like Farxiga for type 2 diabetes and also has a deep portfolio of treatments for rare autoimmune disorders.
Needless to say, many millions of patients depend on these crucial medicines.
In 2021, AstraZeneca generated around £8.9bn in sales to global markets, or about 1.4% of all UK exports. So this is also a very valuable firm to the UK economy.
Looking forward, it is set to launch at least 15 new treatments by 2030. Of course, there’s a risk some of these fail to get approved. Though with a huge pipeline of 167 potential new products, it has incredible scale and potential.
The stock is trading at a very reasonable 16 times forward earnings for 2024.
BAE Systems
Next is defence contractor BAE Systems (LSE: BA.). I’m sure we all wish that war would permanently disappear in a finger snap. Unfortunately, though, we still live in a world of tense geopolitics and conflict.
BAE has manufactured much of the military equipment that the UK and other governments have provided to Ukraine to help defend itself since Russia’s invasion. The firm is even setting up a local presence in Ukraine to supply further necessary ammunition.
Clearly, there is security risk with such operations. But equally clear is that Ukraine’s defence capabilities would be significantly undermined if the firm ceased to exist.
Moreover, given the firm’s huge £66.2bn order backlog, many other nations’ security could be compromised.
Diageo
Lastly, I’d say that Diageo (LSE: DGE) is a stock that passes the snap test. It sells over 200 alcohol brands in nearly 180 countries. Some have been around for centuries, including Guinness and Tanqueray.
Incredibly, the firm has market-leading positions in Scotch whisky (Johnnie Walker), bourbon (Bulleit), tequila (Don Julio), vodka (Smirnoff), gin (Gordon’s), and liqueur (Baileys).
I’m pretty sure millions of drinkers would care if these brands suddenly vanished!
That said, sales have slowed recently as some people drink less or more cheaply during these tough economic times. The stock has fallen 15% in 12 months and this weakness could persist for a while.
However, growth remains strong in Asia, where disposable income is rocketing. Diageo estimates 600m new legal purchase-age consumers will enter the market by 2030, a quarter of those emerging in India alone.
The post 3 top FTSE 100 stocks that easily pass the ‘snap test’ appeared first on The Motley Fool UK.
Pound coins for sale — 51 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
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Ben McPoland has positions in BAE Systems and Diageo Plc. The Motley Fool UK has recommended AstraZeneca Plc, BAE Systems, and Diageo Plc. 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.
