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The uncertain economic picture has thrown away the opportunity to buy quality value stocks. I think some good opportunities can backfire well in the long run.
One FTSE 100 giant, I want to take a closer look WPP (LSE: WPP). Should I buy or avoid stocks?
Let's dive deeper to understand the risks, bullish factors, and outlook to help me make an informed decision.
Keeping the world connected
WPP is one of the world's largest communication agencies of its kind. Specializes in marketing, public relations, and communications. With the track's storied history and breadth and massive presence, it's hard to ignore in its field.
Stocks have been hurt by the recent upheaval, but I think they're down a bit. In the 12-month period, they are down just 4% from 761p this time last year, to current levels of 724p.
To buy or not to buy?
I'll start with the bear case, since it's obvious what happened recently, in my opinion. High interest rates, rising inflation, and political tensions have been the cause of disaster for many economies and businesses. This often leads to reduced use, especially when it comes to marketing and communications.
One of WPP's biggest money spinners, the tech market in the US, is affected by these issues. In turn, WPP's performance and share price are tied. In addition, weak economic growth in China – WPP's other biggest market – also didn't help. It's hard to predict when this might change, but I'll keep an eye on things.
My least concern is the threat of advertising and marketing jobs from outside firms like WPP and going back in-house. This may affect income and returns as well.
On the other side of the coin, WPP's existing client base, and its fully integrated offering, is definitely a draw for me. In context, it works with 300 of the Fortune Global 500 in one way or another, so it is clear that it is trusted by some of the biggest and best businesses in the world. In addition to this, its efforts to capture market share in emerging areas can help boost future profits and returns as well.
As for the all-round offering, this includes product consulting, e-commerce, communications, and more, making WPP an attractive one-stop shop.
Next, the basics look good to me too. The shares look decent value for money at a forward price ratio of less than eight.
In addition, the dividend yield of 5.5% reduces the investment situation. However, I understand that benefits are not guaranteed.
My decision
I think the good outweighs the bad. As a foolish long-term investor, I am willing to look past short-term struggles and look to greener pastures ahead.
It's hard for me to look beyond WPP's offerings, experience, and industry positioning. When the economic turmoil ends, I would expect stocks to rise, and the profits to continue to flow.
I would be willing to buy WPP shares if I next have money to invest.
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