Forget Bitcoin! I’d rather get rich slowly with this FTSE 100 stock – The Motley Fool UK
It’s not hard to see the appeal of Bitcoin. Big price surges such as the rise from under $1,000 to $20,000 in 2017 can make a lot of money in a very short space of time for those brave enough to invest.
But I struggle with putting my money into something which has no fundamentals or underlying physical assets to own like property or gold. There are no company financials to inform your decisions, and the only value of Bitcoin is what the next person is prepared to pay.
Why I’m looking to the FTSE 100 instead
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I’m happier getting rich slowly with my investments, and I think the recent price dip in FTSE 100 company Rightmove(LSE: RMV) provides a good long-term entry point.
Back in February, shares in Rightmove topped 700p and, despite a recent bounce from their year low of 373p, they are still trading more than 20% off their peak. A high P/E ratio of 27 is about average over the past two or three years. In my opinion this reflects the quality of the company you are buying.
A monopoly on the property market?
Rightmove has two big advantages. First, the FTSE 100 business is far and away the market leader. It has an 85% share of the market and substantially more listings than its nearest rival. Second, Rightmove has an operating profit margin of 74%. To put this into context, the stock market average is less than 10%.
This market dominance and cash-rich position means Rightmove can steadily bump up its prices each year. This is exactly what it has done, churning out consistent revenue growth of 8-10% per year.
The Estate Agents are revolting!
Rightmove has not escaped the coronavirus pandemic unscathed. As you can imagine, closing down the property market for several months means fewer people are listing their properties. The FTSE 100 stock is predicting this will result in around a £90m hit to revenue this year.
To entice more listings, Rightmove offered substantial discounts to agencies, which it recently extended until September. This forced estate agent-backed portal OnTheMarket to follow suit and has caused a backlash from the agents.
I do see risk here. There is certainly a question mark around how quickly Rightmove will be able to return to the same level of yearly price increases without facing pressure from the estate agents. But I think the sheer scale, profitability and market dominance of this FTSE 100 juggernaut over its rivals will keep revenues ticking upwards for years to come.
So I say forget about Bitcoin. I think Rightmove offers a much safer long-term investment, and I’ve put my money where my mouth is and invested my own hard-earned cash in the company.
But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!
And here’s the really exciting part…
While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.
That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.
David Barnes owns shares in Rightmove. 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.