Are these 3 fallers too cheap to ignore?

Are there bargains to be had among these depressed shares?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Aren’t stock market plunges great? I love it when something moderately bad happens, and the institutional investors see the end of the world in their tea leaves and rush to hit the sell button. What a great opportunity it is for the more rational among us to snap up bargains.

Cheap insurance

The EU referendum result is bad news for the UK economy in the medium term, but it’s been a boon for those of us who think insurance companies make for great investments. Take Old Mutual (LSE: OML) for example, an insurer whose shares are down 5% today to 194p, for no apparent good reason.

Immediately after the vote, Old Mutual shares lost 9% of their value, and though that wasn’t as bad as some of its peers, it was still an irrational reaction. Since that temporary dip, the shares have gained 15%, so it was a great opportunity for those who like to mop up when they see a knee-jerk panic. But after the recovery, is Old Mutual still a buy now?

Interim results released a couple of weeks ago painted an attractive picture, and we should be seeing a small fall in EPS this year, plus there’s a 15% rise on the cards for 2017. Being focused on South Africa, the UK and US, the EU thing shouldn’t be much of a headache, and P/E ratios of 11 and 10 for this year and next look good to me — especially with well-covered dividend yields of 3.5% and 3.9% pencilled-in.

Mining bottom?

The beginning of the year marked the turnaround point for the mining sector — at least, I’ll cautiously say it’s starting to look that way. If you’d got your timing right, Anglo American (LSE: AAL) would have almost quadrupled your money since the stock’s low point on 20 January, reaching 848p as I write. But as we know, timing is something that very few people are good at, and investing based on overall valuation is far more likely to bring success — so is Anglo American cheap now?

Well, the super-cheap days of early 2016 were a result of serious panic-driven overselling, so once again there was a ‘maximum pessimism’ opportunity to buy when the doomsters were selling. On that basis, I think this year’s meteoric rise is over. But with debt falling and commodity prices showing signs of a turnaround, I see Anglo American and the rest of the mining sector as good long-term value now.

Oversold financials?

The financial sector was hit especially hard by the Brexit vote, and we’ve seen specialist banking group Investec (LSE: INVP) dipping 6.4% today, to 461p. There has been a recovery since the immediate post-vote hit, but Investec shares are down 9% since 2016’s peak in April, and down 23% since 2015’s highest point.

The shares are now on a forward P/E of a pretty undemanding 10.4 for the year to March 2017, dropping to only 9.3 a year later, with forecast dividend yields of 4.6% and 5.1%, and those look like pretty attractive fundamentals. So why so cheap?

Investec does a lot of its business in South Africa, and that country’s current economic wobbles are weighing heavily on the valuation of its shares. But if you see South Africa as having solid long-term potential, as I do, then you might see these as bargain times.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

3 of my top FTSE 250 stocks to consider buying before April

Buying undervalued UK shares can be a great way to generate long-term wealth. Here, Royston Wild reveals a handful on…

Read more »

Ice cube tray filled with ice cubes and three loose ice cubes against dark wood.
Investing Articles

Just released: our 3 top income-focused stocks to buy before April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

Is this the best chance to buy cheap FTSE 100 shares in a generation?

I want to buy shares when they're cheap, and sell... never, just keep taking the dividends. And the FTSE 100…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Could NatWest shares be 2024’s number one buy for passive income?

For those of us looking to earn some long-term passive income, how does NatWest's 7% dividend yield sound? It sounds…

Read more »

Investing Articles

£12K in savings? Here’s how I could turn that into £13K annual passive income

This Fool explains how investing a lump sum can help her build a passive income stream to enjoy in her…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Here’s why Rolls-Royce shares are now set to fly over the £4 mark

Once again, Rolls-Royce shares are crushing the FTSE 100. Should I add to my holding of this stock at the…

Read more »

Investing Articles

1 under the radar FTSE 100 AI stock investors should consider buying

Our writer explains why this FTSE 100 pick could be a shrewd investment with its established experience of using AI…

Read more »

Investing Articles

Does the beaten-down Diageo share price make it a no-brainer buy?

Harvey Jones spent years waiting for the Diageo share price to look like good value, before finally buying it in…

Read more »