After a strong finish to the year from the stock market, investor sentiment is strong for 2024. That’s got me thinking about which stocks can do well in a bull market.
Traditionally, UK stocks tend to do worse than their US counterparts when share prices are rising. But there are a couple of FTSE 100 stocks I think could do well in a helpful environment.
Strong market?
Why might investors want to prepare for a bull market? One big reason is interest rates.
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Throughout last year, inflation was falling in both the UK and the US. As a result, there’s a chance central banks will lower interest rates at some point in the next 12 months.
Of course, there’s a risk this might not happen or might take longer than investors are expecting. But it seems likely and it should be positive for share prices across the board.
Even if the stock market in general stands to benefit, individual shares are likely to be affected to a greater and lesser extent. And one in particular stands out to me.
The stock
The company in question is Halma (LSE:HLMA). Over the last couple of months, optimism about lower interest rates has already started driving the stock higher.
The company is a conglomerate that aims to grow by adding businesses to its network and improving their operations. It works via three divisions – healthcare, safety, and environment.
With a company like Halma, revenues and profits are unlikely to decline in any given year. The biggest risk is that they don’t grow fast enough to justify a price-to-earnings (P/E) ratio of 34.
Rising interest rates have made acquisition activity more expensive and caused growth to slow. This has caused the company’s share price to fall, but Halma should benefit if rates come down.
Resiliency
Halma is my top pick for a 2024 bull market. But that’s not just because I’m betting on the company to benefit from lower interest rates.
Despite the challenges, the company has managed to achieve 9% revenue growth in 2023. And it recently completed the acquisition of TeDan – a group of healthcare businesses – for £72m.
The ability to keep growing through a period of high interest rates and low GDP growth is a sign of a strong business. And it’s one of the reasons that Halma outperformed the FTSE 100 in 2023.
Halma shareholders stand to benefit from lower interest rates in two ways. Its share price should move higher with the rest of the market and its growth prospects should improve significantly.
Should I buy Halma shares?
The more I look at Halma, the more impressed I am. The firm’s focus on finding businesses in its areas of competence and acquiring them has generated great results for shareholders over time.
In the next bull market – whether it’s 2024 or later – I expect it to be able to outperform the broader FTSE 100. So it’s on the list of stocks I’m looking at buying for my portfolio right now.
