2021 has been good for the stock markets so far, which have run-up quite a bit despite some fluctuations. As a result, some of the FTSE 100 stocks I like best, have also seen a significant rise in their share prices. In fact, they have now increased so much, that they are on my list of stocks to buy if there were a market crash tomorrow.
This does not mean that I have a pessimistic outlook on the stock markets. Only that I like to be prepared for a seemingly challenging situation, if it were to arrive. As it happens, some of the stocks I like best right now are also among the priciest ones around.
Spirax-Sarco Engineering is the priciest FTSE 100 stock
The first of these is the FTSE 100 engineering giant Spirax-Sarco Engineering (LSE: SPX). It is the most pricey stock among the index’s constituents. As I write, its share price is at a huge £162.6. It also has an enviable share price trajectory over time. In the past year, it has risen over 40%. And in the last three years, it has seen an almost 160% increase!
Its share price has dipped a bit since yesterday, after it released its trading update. Because of supply chain disruptions and rising costs, the company has reduced its forecast for both 2021 and 2022. While this explains the softening in its price, I would be very surprised if it continues to hold the stock down. The company still expects “record levels of revenue, profit, and operating margin for the full year 2021”.
It is little wonder then that its price-to-earnings (P/E) is at a huge 58 times right now. This shows the kind of premium investors place on the financially robust company. But because it looks a little too high to me, I would ideally wait for a market crash before buying the stock.
AstraZeneca goes from strength-to-strength
I might have missed the opportunity to buy Spirax-Sarco Engineering earlier, when it was still cheap, but I did buy another pricey stock. I am talking about the pharmaceuticals biggie AstraZeneca (LSE: AZN). The Anglo-Swedish company made its name as a cancer treatment specialist. But its popularity rose to a whole new level last year when it developed a Covid-19 vaccine with the University of Oxford.
With its current share price at £84, it is the fifth most pricey FTSE 100 stock right now. There are huge variations in its P/E estimates across five different sources I checked. The lowest is around 45 times and the highest a huge 100 times. The point here is this:whichever way I look at the stock, it is priced at at least 45 times its earnings, if not much more.
But then, it has always been the case for AstraZeneca. In the past year, its share price has fluctuated a lot, resulting in almost no gains in the past year. But that would not stop me from buying more of the robust stock for the long term if a stock market crash were to happen. Over the past five years, it has doubled its share price. That, for me, is reason alone to consider buying more of it.
Manika Premsingh owns shares of AstraZeneca. The Motley Fool UK has no position in any of the shares mentioned. 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.
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