Many FTSE 100 stocks have pulled back recently due to market volatility. The good news is that some excellent businesses are essentially on sale, in my opinion.
One stock I like the look of is HSBC (LSE: HSBA). I want to take a closer look at it to decide if now is the time to buy some shares for my holdings.
Banking and financial services
HSBC is one of the largest banks and financial services providers in the world. It serves approximately 39m customers across all its businesses and is listed on four different stock exchanges across the world.
Soaring inflation and rising interest rates have pushed down many stocks. HSBC has been included in that generally speaking, but its shares have rallied over a 12-month period. As I write, the shares are trading for 614p, whereas this time last year they were trading for 529p. This equates to a 25% increase. However, they are down 1% from February highs of 620p.
Pros and cons
Let’s start with HSBC’s bullish traits. As I’ve touched upon earlier, the current valuation looks enticing. The shares are trading on a price-to-earnings ratio of just seven. This is below the FTSE 100 market average.
So what am I getting for this potentially cheap stock in HSBC? Well, there is an excellent passive income opportunity with a dividend yield currently at 5.4%. Again, this is higher than the index average of 3%-4%. It is worth remembering that dividends are never guaranteed and can be cancelled at any time.
In addition to passive income, HSBC’s reputation, global footprint, and customer base are already established. I believe this will continue to support steady performance growth and investor returns. I’m more excited by its strategy to expand in emerging markets, namely Asia. It is pivoting its focus and operations towards China and the surrounding region. This is because the demand for financial services products in the region is increasing due to a rise in disposable income.
So to the bear case then. Looking at HSBC’s growth plans linked to China, there is a lot to like but one major risk to consider. The region is prone to geopolitical volatility. This means HSBC’s growth plans could be scuppered, impacting performance and investor sentiment.
In addition to this, the recent collapse of Silicon Valley Bank in March raised concerns that another financial crash similar to 2008’s global financial crisis could occur. HSBC was one of the biggest fallers at that time, although its share price has clawed back somewhat since that drop in share price. Current macroeconomic issues discussed earlier mean the spectre of a financial crisis is still looming. Any crash could impact performance and shareholder returns.
A FTSE 100 stock I would buy
For me personally HSBC’s bullish aspects far outweigh its bearish traits. I believe HSBC could be an excellent addition to my holdings and I would buy some shares, if I had the spare cash to do so.
HSBC’s diversification and ambitious growth plans, coupled with its current valuation and passive income opportunity helped me make my decision.
