Picture supply: Britvic (copyright Evan Doherty)
As Warren Buffett says, when others are fearful it’s the time for an investor to be grasping. Worry has been stalking the markets up to now few days and many main FTSE 100 shares have been on the sharp finish of a wave of promoting.
One well-known FTSE 100 share has seen its value collapse 39% over the previous yr alone.
It’s a share I have held for some time already. However final week I took the chance of a tumbling value to purchase some extra – and this week, as the worth headed even decrease, I did the identical again.
Retaining a rational head in turbulent markets
That form of behaviour could be wealth-building, nevertheless it may also be dangerous. Whereas inventory market turbulence pushing down a share value can result in a bargain-hunting alternative, it may additionally be reflecting some easy financial realities. Possibly the driving force for a inventory market correction has additionally decreased the long-term worth of a enterprise, one thing that’s then mirrored in its share value.
Throughout market turbulence, there won’t be time to do detailed analysis. So I assume a wise investor is at all times ready upfront, able to pounce after they see a shopping for alternative which may be short-lived.
Defying the broader market
The particular share in query, by the way in which, is JD Sports activities (LSE: JD). As the broader FTSE 100 tumbled final Wednesday (9 April), it defied the gloom and moved up sharply following a buying and selling replace.
That got here after some sharp falls within the weeks earlier than – and that was when I made my purchases.
At face worth, the buying and selling replace won’t appear nice. The sportswear retailer stated it was too early to supply clear steering on what US tariffs could imply for its enterprise. It reported that final yr’s efficiency got here in step with expectations and that the present yr’s outlook is for a decline in like-for-like revenues.
Why was the market excited, then? Following a number of revenue warnings and downgraded expectations, JD merely delivering in step with revised expectations for final yr. And that was a aid.
Trying forward, whereas like-for-like gross sales could decline, the FTSE 100 agency nonetheless expects vital income progress (round 14%), because of prior acquisitions and an expanded retailer footprint.
In the meantime, JD plans to scale back its future retailer property growth exercise. That ought to imply decrease capital expenditures, so hopefully the next proportion of working income will feed into the post-tax revenue.
High quality firm at a knockdown value
Regardless of that, JD Sports activities has a market capitalisation of lower than £4bn. The retailer ended its most up-to-date monetary yr with web money, earlier than lease liabilities. It expects 2026 revenue earlier than tax and adjusting objects to be in step with consensus estimates, of £920m.
That price-to-earnings ratio appears very low to me for a solidly worthwhile FTSE 100 firm with robust progress prospects.
Sure, tariffs are a threat given JD’s massive US footprint. A weak financial system might harm client confidence, damaging gross sales and income. However as a long-term investor I am wanting past the short-term financial outlook.
I reckon JD Sports activities is a FTSE 100 cut price hiding in plain sight and have been increase my shareholding due to that.
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