Why GlaxoSmithKline plc, Babcock International Group PLC and John Menzies plc Should Lag The FTSE 100 Today

GlaxoSmithKline plc (LON: GSK), Babcock International Group PLC (LON: BAB) and John Menzies plc (LON: MNZS) are slipping.

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The FTSE 100 (FTSEINDICES: ^FTSE) fell back today, losing 21 points to 6,707 by early afternoon, after Chinese jitters had an impact on the big London-listed miners. But at least the improving economic situation in the US is starting to be seen for what it really is — good news, rather than just a gloomy precedent for the end of quantitative easing.

A couple of disappointing updates from FTSE 100 companies also contributed to the sluggish day today. Here are three that fell:

GlaxoSmithKline

GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) shares fell 20p (1.2%) to 1,630p after a disappointing Phase III trial. The firm’s Lp-PLA2 inhibitor darapladib, a candidate for the treatment of coronary heart disease in combination with a cholesterol-lowering statin, did not show any sign of lowering the risk of heart attack or stroke when compared to a placebo.

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But according to R&D president Patrick Vallance, Glaxo will “continue to investigate the role of Lp-PLA2 inhibition in coronary heart disease and other diseases“.

Glaxo shares are up around 19% over the past 12 months, just a shade ahead of the FTSE but with a better dividend return.

Babcock International

Despite reporting “strong businesses and significant bid pipelineat its halfway stage, Babcock International Group saw its share price dip by 11p (1%) to 1,280p.

For the six months to 30 September, the engineering services firm enjoyed a 9% rise in underlying revenue to £1,701m, with underlying pre-tax profit up 17% to £141.7m and earnings per share up 13% to 31.6p. Net debt fell from £581m to £572m, and the interim dividend was raised 9.5% to 6.9p per share.

John Menzies

A profit warning sent John Menzies (LSE: MNZS) shares down 58p (7.1%) to 761p, after the firm told us of poor trading conditions at its Menzies Distribution division. Weaker-than-expected sales of magazines and newspapers are now “expected to impact the second half result“, suggesting the current consensus for a full-year fall in earnings per share of around 6% is understated.

But at least Menzies Aviation is performing well, and its “overall outlook remains positive“.

The shares had been up more than 40% before today’s drop, after a steady rise since the summer.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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 does not own any shares mentioned in this article. The Motley Fool has recommended shares in GlaxoSmithKline.

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