The 1 FTSE 100 stock I’ll be buying in a market crash

I’m waiting for a stock market crash to snap up market leaders. But there’s one FTSE 100 stock, in particular, I want to acquire.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

There’s a handful of what I believe are really high-quality stocks in the FTSE 100. Unfortunately, it seems as if the rest of the market loves these businesses as well. Most are trading at premium valuations, which I’m not willing to pay.

That’s why I’m waiting for a stock market crash to snap up these market-leaders. And there’s one FTSE 100 stock, in particular, I want to acquire more than any other.

A FTSE 100 stock for the long term 

Here at the Motley Fool, we’re long-term investors. That means we look past short-term headwinds and try to focus on a business’s underlying strengths. This is especially important in times of economic uncertainty as it’s easy to be distracted by doom-monger headlines. 

Companies with substantial competitive advantages tend to achieve the best performances over the long term. They’re also less likely to be disrupted by short-term economic headwinds.

These advantages can come in many forms. A strong brand, sector-leading customer service, high-quality product or just size are all versions of competitive advantages. 

Rightmove (LSE: RMV) has several of these. It’s the most prominent property portal in the country, its brand is well-known, and its product has revolutionised the UK property market. 

Thanks to these advantages, the group’s website is one of the most valuable web properties in the UK. That means customers are willing to pay a premium to list on its site. 

And because the website requires relatively little in the way of capital spending to maintain, the firm’s profit margins are high. Rightmove has reported an average operating profit margin of around 70% for the past five years. According to my research, there are only a handful of other London-listed companies achieving the same level of profitability.

Growth trajectory

Over the past six years, the FTSE 100 stock’s competitive advantages have helped it take over the online real estate market. Earnings per share have grown at a compound annual rate of 15% since 2014. 

I think this trend is highly likely to continue. Rightmove’s size and scale have proved difficult for competitors to conquer. Unless the company makes a significant mistake, I reckon these advantages will remain, allowing a business to maintain its hefty profit margins.

Further, because customers don’t have many other options, Rightmove can increase its prices year after year without worrying about a significant exodus. Once again, I think this advantage puts the FTSE 100 stock in an elite club. 

Those are the reasons why I want to buy shares in Rightmove. Unfortunately, the stock is currently trading at an eye-watering price-to-earnings (P/E) multiple of 54. Thanks to its advantages, I think the company deserves a premium valuation, but that P/E multiple is far too high.

As such, I believe the next stock market crash could offer an excellent opportunity for me to snap up shares in this leading FTSE 100 stock at a discount price. It might be a while before this opportunity arrives but, in my opinion, Rightmove isn’t going anywhere in the meantime. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves does not own any share mentioned. The Motley Fool UK has recommended Rightmove. 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.

More on Investing Articles

Investing Articles

As like-for-like sales continue to fall, is the B&M European Value Retail SA (LSE:BME) share price a bargain?

B&M European Value Retail is known for its low prices, but could growing like-for-like sales make the share price the…

Read more »

Illustration of flames over a black background
Investing Articles

After rocketing 232% in a year can this red-hot FTSE 250 stock keep going gangbusters?

Harvey Jones says this FTSE 250 stock's on fire after smashing the index over the last year. It's cheaper than…

Read more »

Investing Articles

The Burberry share price has jumped 15% this morning! Time to pile in?

Harvey Jones was thrilled to wake up this morning and find the Burberry share price flying, but he's still sitting…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

At a bargain-basement price now, is it time for me to buy this 8%-yielding FTSE 250 media stock?

Shares in this FTSE 250 broadcasting firm continued their recent decline after the latest results release, leaving them looking an…

Read more »

Investing For Beginners

Here’s what a landmark legal ruling could mean for the Lloyds share price

Jon Smith mulls over whether issues with historical motor finance commissions could spell trouble for the Lloyds share price into…

Read more »

Investing Articles

I’d buy 4,186 Legal & General shares to aim for £14,616 a year in passive income

A relatively small sum invested in Legal & General shares can be transformed into much bigger passive income over time…

Read more »

Businesswoman calculating finances in an office
Investing Articles

Here’s why the 3i share price is climbing after the company’s latest earnings update

After the firm's latest earnings report, the 3i share price reflects a company going from strength to strength, with the…

Read more »

Investing Articles

£10 a day invested in UK shares could one day create a second income of over £3,000 a month!

Mark David Hartley outlines a strategy he’d use to aim for a second income that gets bigger over time, by…

Read more »