With share prices down across the board this week, it might look like there are no winners from the plunge in the pound’s value. However, I don’t think that’s true. In fact, I can think of several FTSE 100 stocks that might actually benefit. Here are three.
Diageo
Thanks to its bumper portfolio of 200+ brands that people continue buying whatever the economic climate, Diageo (LSE: DGE) is one of my favourite FTSE 100 stocks.
But another one of Diageo’s attributes is that it’s a truly global business. It’s this geographical diversification that should mean the company is able to remain resilient in the face of a plunging pound.
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Trouble is, Diageo shares never trade at bargain basement prices. Right now, for example, they change hands on a price-to-earnings (P/E) ratio of 22. That said, this is actually below the five-year average valuation of 25.
The company is also a reliable source of dividends. Sure, a 2.2% yield might look very average compared to some in the FTSE 100. However, Diageo has been remarkably consistent in hiking its payouts every year.
Personally, I’d rather have a smaller but more stable level of passive income than one reliant on firms that may never pay up. If I had the cash, I’d jump in.
National Grid
What it does may be essential, but National Grid (LSE: NG) shares have been losing height over recent months. As I type, the stock is down 12% this year.
I wonder if some investors may begin reaching for the ‘buy’ button again. After all, a good proportion of the power provider’s assets are actually located across the pond. It owns and operates electricity distribution networks in upstate New York and Massachusetts and gas distribution networks across the Northeastern US.
All this dollar exposure should mean that this highly defensive company can maintain its status as a dividend aristocrat going forward.
Holders are now looking at a yield of 5.7%. That’s pretty attractive to me considering that the best savings account only offers 2.5%. A P/E of 14 is also lower than it was earlier in the year.
If my own portfolio weren’t more tilted towards growth stocks, I’d hoover up some of these shares.
Pearson
Pearson (LSE: PSON) is yet another top-tier member worth commenting on. It provides tests and scoring services to governments, educational establishments and businesses with a particularly large presence in the US.
Of the three FTSE 100 stocks mentioned here, Pearson has been easily the best performer in 2022. The shares are up 44% as I type. Is there more to come?
Again, the fact that it has significant operations in a dollar-denominated market (where earnings are then converted into pounds) probably won’t do any harm. The growth in digital learning, turbocharged by the pandemic, looks set to continue as well.
However, I shouldn’t overlook the possibility that recent share price gains are due to a failed takeover deal earlier in the year. The company may potentially still be a target but the question is, how much hope of another bid is now priced in?
I’d say a fair bit. Pearson’s shares trade at 18 times forecast earnings. The five-year average is 13 times.
I believe there are better opportunities out there for my portfolio.
