2 Attractive FTSE 100 Contrarian Opportunities: Wm. Morrison Supermarkets plc And RSA Insurance Group plc

Wm. Morrison Supermarkets plc (LON: MRW) and RSA Insurance Group plc (LON: RSA) are two contrarian opportunities.

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

It’s no secret that some of the world’s best investors have made their fortunes by buying depressed assets, or contrarian opportunities at attractive prices, and profiting as the businesses recovered.

Indeed, buying when there is “blood on the streets” has been the mantra of US billionaire Warren Buffett ever since he began his investing career.

Right now, the two most attractive contrarian opportunities on the market are Morrisons (LSE: MRW) and RSA Insurance (LSE: RSA).

RSAMaking rapid progress

After discovering accounting regularities at its Irish division last year, RSA is in recovery mode and RBS‘s former boss Stephen Hester has taken charge of the turnaround. Mr Hester is well respected within the City and has not wasted any time getting to grips with RSA.

Within weeks of Hester’s appointment, RSA’s new boss announced a £773m rights issue, designed to steady the ship and bolster the insurers balance sheet.

When first announced, this cash call was criticised by some shareholders as being too large. However, RSA’s management believed a rights issue of this size was needed to avoid having to ask for more cash in the future.

What’s more, RSA is expected to raise a further £300m this year through assets disposals, some of which have already taken place. All in all, the company is aiming to raise £800m from the sale of underperforming business units over the next few years.

But despite the need to raise cash, RSA’s underlying business remains profitable and once the company has bolstered its balance sheet, RSA should be able to return to growth.

Further, with around £1.6bn in additional capital being raised, RSA should end up, if anything, overcapitalised — great news for investors worried about the company’s future.

morrisonsValue on offer

While RSA is a contrarian opportunity in the process of a turnaround, Morrisons is more of a value play.

Indeed, as the UK grocery sector becomes ever more competitive, it’s hard to try and predict if and when Morrisons’ will stage a turnaround.  

Still, what is really attractive about Morrisons is the fact that at current levels, investors are placing no value on the company’s property portfolio. 

You see, Morrisons owns many of its own superstores, farms and even abattoirs — the total value of this property is in the region of £9bn, £4bn more than the company’s current market value. As Morrisons is trading at such a low value compared to its assets, much of the risk involved with taking a contrarian bet on the company is mitigated, as if worst comes to worst, the company can just sell its property.

Additionally, the supermarket could be subject to a take over as any buyer could purchase Morrisons, break the company apart and sell off the property for a quick multi-billion pound profit — not bad.

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.

Rupert owns shares in Morrison. The Motley Fool has recommended shares in Morrison. 

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

3 UK stocks I reckon could benefit from the upcoming general election

As the general election hurtles towards us, this Fool wonders which UK stocks could benefit, and focuses on three picks…

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

At 11%, this dividend share pays the biggest yield in the FTSE 100

When a dividend share offers a big yield, we need to be cautious of the risks. But I reckon this…

Read more »

British Isles on nautical map
Investing Articles

I reckon Hiscox shares could be one of the best bargains on the FTSE

I've been investing in FTSE companies for years, but after a major decline I've not seen a company with as…

Read more »

Grey Number 4 Stencil on Yellow Concrete Wall
Investing Articles

4 reasons I’d still buy National Grid shares in a heartbeat despite the recent wobble!

As National Grid shares plunged on the news of a right issue, I’m not flinching, and reckon it's a top…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

After gaining 45% in 12 months, is the Amazon share price now overvalued?

Our author thinks the Amazon share price might be too high. While the long-term future of the business looks bright,…

Read more »

Investing Articles

2 hot dividend stocks I’d buy and hold for 10 years

Our writer reckons these two dividend stocks could help her bag juicy dividends for years to come and explains why.

Read more »

British Pennies on a Pound Note
Investing Articles

2 dividend-paying penny shares I’d happily own

These two penny shares have caught our writer's eye for a combination of income prospects now and business growth potential…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

This FTSE 250 share looks like a bargain to me!

This FTSE 250 share has seen its price tumble due to chaotic local economic conditions in a key market. But…

Read more »