With the FTSE 100 down a brutal 9% this year, plenty of big-name stocks have taken a pasting. Some have done even worse than the index and here are three of the worst performers. Should you grab ’em while they’re cheap?
Aberdeeen Anguish
Aberdeen Asset Management (LSE: ADN) built its reputation on its emerging market funds and is losing it for the same reason. Anybody can make money in a rising market but Aberdeen has been losing it hand over fist in a falling one, as investors flee China and Asia. Money has been flowing out of its fund range and the stock is down 33% over the last six months.
Investors are an ungrateful lot, soon forgetting the fact that Aberdeen’s dividend per share growth has compounded at a generous 20% for the last decade. You can buy the stock today at less than 10 times earning and pocket a healthy yield of more than 5.46%, although that could come under pressure if emerging markets fall further.
Aberdeen’s strong balance sheet, disciplined cost management and takeover potential makes it a tempting buy. But with US Federal Reserve hawks talking up a 2015 rate hike again, which would inflict further damage on indebted emerging markets, now may be too early to buy. Just don’t leave it too late.
Hold On Tight
No prizes for guessing why HSBC Holdings (LSE: HSBA) is in the doghouse, given that it earns 78% of its pre-tax profits in China and Asia. Perhaps investors should be grateful that its share price is down just 25% over the past 12 months. It could have been worse. Just look at troubled Standard Chartered, down 44%.
Goldman Sachs recently rated it a ‘buy’ due to its strong capital position and says it will benefit from rising US interest rates. That will lift net interest margins as loans tied to the Fed’s target rate will automatically rise but HSBC’s savings rates will creep up at a slower pace. Banks love to play these tricks with savers and soon it will be game on again.
HSBC group chairman Douglas Flint is bracing himself for a repeat of China’s Black Monday stock market crash, so maybe keep your ammunition dry for another buying opportunity. Yet at 11 times earnings and yielding 6.38%, the price is already right for long-term investors.
Unsure Of Shell
China also has its fingerprints all over the last year’s 36% share price collapse at Royal Dutch Shell (LSE: RDSB), as its slowdown is partly to blame for the plunging oil price. Yet there are now signs that oil could turn, with US crude inventories falling for the second consecutive week and Brent crude edging towards $50 a barrel again.
The Saudi strategy of washing away US shale on a flood of cheap oil may finally be paying off, as drillers see their credit lines shrink as banks revalue their decreasing reserves. Investment is down on lower prices and business is getting tougher, although further signs of slowing global demand could put a cap on any revival in the short term.
Trading at just 7.95 times earnings and yielding 7.52%, Shell is now in bargain basement territory. If oil stays low that yield will eventually have to be cut, but management will fight tooth and nail before that happens. When oil rises, surely, so will Shell.
