The FTSE 100's Hidden Vulnerability: A Potential Crash Candidate?
In a year of record-breaking highs, it's no surprise that concerns about market overheating are on the rise. So, I delved into the world of AI to uncover the most vulnerable stocks in this bull market.
ChatGPT's top picks for potential crash candidates included Royal Dutch Shell, Glencore, Barclays, and Melrose Industries. But the real eye-opener was the fifth suggestion: International Consolidated Airlines (IAG), the owner of British Airways.
A Surprising Rise
IAG's shares have soared by an impressive 40% in 2025, and that's not even the whole story. Investors who had the courage to buy in 2020 have seen their stakes multiply, with a growth of around 300% as global travel rebounded. And let's not forget the dividends paid out in September 2024 and June of this year!
This remarkable recovery is a testament to the power of long-term investing, a strategy we at Fool UK strongly advocate.
The Vulnerability Factor
So, why is IAG considered at risk? According to the AI bot, it's because the company is entirely dependent on discretionary consumer and business travel. This dependence can be a double-edged sword, especially during economic downturns when cutting back on travel expenses becomes an easy choice.
The problem is that IAG, with a market cap of £19 billion, can't easily reduce its costs. Even with a lack of flyers, the company still faces substantial expenses related to aircraft maintenance, staff salaries, and fuel hedging. This explains the surge in debt on IAG's balance sheet during the pandemic.
The Market Paradox
Here's the intriguing part: shouldn't the current fears of an impending market crash be pushing IAG's shares down instead of up?
Well, the positive momentum could be due to analyst optimism ahead of IAG's next update, scheduled for this Friday (7 November). In September, IAG reported a Q2 profit of €1.68 billion, surpassing the anticipated €1.4 billion. This was largely driven by strong demand for transatlantic flights, easing concerns over President Trump's tariff war.
If this trend continues, we could see further gains. The shares currently trade at a below-average price-to-earnings (P/E) ratio of seven, indicating that they are still relatively cheap.
The Bottom Line
My take is that there's no guarantee that IAG's shares will fall, even if other stocks do. It all depends on the catalyst for the crash. IAG could very well continue its upward trajectory, especially if analysts' expectations are met or exceeded.
A Word of Caution
While AI can provide insights, it's crucial to remember that it should never replace thorough research and understanding of a company's fundamentals. ChatGPT, for all its capabilities, doesn't have the context to predict share prices with certainty. All five stocks mentioned here could potentially end the year higher than they are now.
Personally, I believe there are other FTSE 100 shares with higher price tags that might be more susceptible to a reckoning if markets were to take a turn for the worse. But that's a big 'if'!
What do you think? Are there any other FTSE 100 stocks you'd consider more vulnerable to a market crash? Feel free to share your thoughts and insights in the comments below!
