Image source: Getty Images
When it comes to choosing investments for my portfolio, I always look for the best. After all, what I'm putting at risk is my hard-earned money and I want to make sure I choose wisely.
I consider these UK stocks to be as good as it gets. So let's find out what I find attractive about the company and the associated risks.
Safer, cleaner and healthier
Halma (LSE:HLMA) is a UK-listed international company that operates with the intention of keeping people safe, the environment clean and improving health. For example, it creates fire detectors, elevator safety systems, and devices that monitor water quality.
The company recently acquired Ramtech, which specializes in wireless security and safety solutions. Thanks to the agreement, Halma has obtained control of the WES3 technology and REACT system, which play an important role in large-scale projects such as London's Thames Tideway tunnel. This is just one of the many companies under the Halma umbrella. It is truly a conglomerate.
The company is clearly well diversified and includes operations in the US, Europe, Asia, the UK and the Middle East, among others. Furthermore, the fact that it has positioned itself in various industries means that it is also protected from risks related to specific segments of the economies.
I consider it one of the UK's top investments.
When evaluating the quality of the stock, the first thing that caught my attention was its very high net margin of 12.4%. Additionally, its balance sheet has a healthy amount of more equity than debt. And its revenue has been growing at a healthy 11% annually for the past three years.
But that's not all I like about investing. Analysts expect the company's earnings to grow at a compound annual growth rate of 11.8% over the next four years. So, with the share price down over 30% at the moment, I think I have a bargain on my hands.
The main risks I see
One of the main concerns I have with Halma's business model is that, due to its conglomerate-style nature that spans across different industries, it faces the risk of becoming too thin.
Other successful holding companies typically operate a portfolio focused on one industry. As Halma's management has a fairly wide range of businesses to oversee, there are more diverse risks to deal with.
I think this could be difficult for the company to control in the long term. Additionally, competitors could easily dominate if they specialize in areas that Halma only dabbles in.
Think about all the new companies emerging in the health, safety and cleaning sector that will embrace automation, artificial intelligence and robotics. Halma could be left behind if she doesn't adapt quickly enough.
I think it is an excellent choice.
I consider this to be one of the best companies listed in the UK at the moment. Although the risks are considerable, to me the benefits seem to significantly outweigh them.
I consider Halma to be an almost five star company. But if I invest, I'll want to look at future acquisitions it makes and how it approaches integrating advanced technology.
This one is high on my watch list for the next time I make some investments.
