Wow – I dodged a bullet with this FTSE 100 growth stock. I banked a 70% profit just before the 2008 financial crisis, then forgot all about it. I can’t remember why I sold, but I’m glad I did!
I’m talking about life insurer Prudential (LSE: PRU). Today, its shares trade at 720.8p. That’s the lowest level since November 2012, almost a dozen years ago.
Three years ago, the Prudential share price was flying high at 1,545p. It’s been falling ever since and can’t seem to stop. It’s down 30.91% over 12 months.
This was supposed to be one of the most exciting insurance stocks on the FTSE 100, taking advantage of a generational opportunity by shifting its operations to booming Asia, with headquarters in Hong Kong and operations all over China.
FTSE 100 straggler
This gave UK investors the confidence of a domestic listing and solid rules on corporate governance, combined with exposure to the world’s second-biggest economy. What could go wrong?
Quite a lot, actually: politics, property, shadow banking, youth unemployment, trade wars, authoritarianism, Taiwan… Chinese Premier Xi Jinping now faces a host of problems, many of his own making.
Yet the Prudential business seems fine. Full-year 2023 results showed business profits up 45% to $3.125bn. Adjusted operating profit rose 8% to $2.893bn. The board hiked the full-year dividend 9% to 20.47 US cents per share.
Last month, CEO Anil Wadhwani said Pru would return $2bn to investors via a share buyback between now and mid-2026. He also said the 2024 annual dividend to grow in the range of 7% to 9%.
That’s important, because the headline yield has been around the 2% mark for as long as I can remember. Today, it’s yielding 2.29%, well below FTSE 100 average of 3.7%. And for once, we can’t blame that on a rising share price!
Brilliant bargain?
Its dividends took a beating during the pandemic, and are only now starting to recover. Let’s see what the charts say.
Chart by TradingView
It’s been a tough time for FTSE 100 insurers generally, with Legal & General Group, M&G, and Phoenix Group Holdings all struggling share-price wise. But at least those three offer whopping yields of 8% or 9%. Pru doesn’t.
The Chinese economy is picking up and could hit its 5% GDP growth target. That could persuade investors to take a second look at the Pru. They’ll be impressed by its low valuation. I was, anyway. Today, Prudential shares trade at just 10.76 times earnings, below the FTSE 100 average of 12.7 times.
Prudential isn’t a pure-play China stock — it’s doing nicely in Thailand and India, and has its sights set on Africa. It looks like a brilliant recovery opportunity, possibly one of the best on the entire FTSE 100.
The danger is that it’s looked like a brilliant opportunity for years, without coming good on its promise. It’s now on my watchlist, though. When I have cash to invest, I’ll give it a second shot.
The post Nearing its 12-year low, this FTSE growth stock could be the bargain of the year! appeared first on The Motley Fool UK.
Like buying £1 for 31p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p 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 10%, 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
More reading
1 growth stock I’d consider before Rolls-Royce
I think this FTSE 100 stock could be a once-in-a-decade buy
Harvey Jones has positions in Legal & General Group Plc, M&g Plc, and Phoenix Group Plc. The Motley Fool UK has recommended M&G Plc and Prudential 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.
