Today I am looking at the investment prospects of four battered FTSE beasts.
It is little surprise that diversified resources giant Glencore (LSE: GLEN) has taken an absolute pasting so far in 2015. The business has been the worst performing stock across the entire mining sector and has fallen 60% since the turn of the year. And despite measures to rectify collapsing commodity prices – the business has vowed to slash both copper and zinc production during the past month — I reckon the firm remains a perilous long-term selection.
Sure, the company has enjoyed a solid bump higher in recent weeks as material prices have recovered from multi-year lows. But as data from commodities gorger China continues to disappoint — numbers this week showed imports slump 20.4% in September, speeding up from August’s 13.8% slide — and the rest of the world’s major producers increase rather than shutter production, I reckon shares in Glencore should head lower again along with commodity prices.
Aberdeen Asset Management
Financial services specialists Aberdeen Asset Management (LSE: ADN) have also come unstuck during the course of 2015, the stock having conceded 22% since the start of January. The company’s heavy emerging market focus has left it at the mercy of patchy investor confidence, with concerns over a Chinese economic ‘hard landing’ leading client activity to fall.
But unlike Glencore, I believe Aberdeen Asset Management is a great long-term selection as the investment case for developing regions remains strong. And sustained share price weakness leaves the business dealing on a prospective P/E rating of just 11.3 times — comfortably below the value benchmark of 15 times or below — and a dividend yield of 5.5% blows the FTSE 100 average out of the water.
Shares in Johnson Matthey (LSE: JMAT) have surrendered more than 27% of their value since the turn of 2015, and I do not believe the pain could be quite over for the London-based business. Although precious metals have recovered some ground in recent weeks — indeed, embattled platinum has risen around 10% in the past fortnight alone to reclaim the $1,000 per ounce marker — I reckon the potential for fresh weakness could batter the refiner’s top line yet again.
On top of this, uncertainty over the future of the diesel engine also makes Johnson Matthey a dicey pick in my opinion. The business builds autocatalysts for use in both petrol and diesel vehicles, but the latter is by far the most lucrative field for the London firm. With legislators running the rule over the environmental impact of diesel power following the Volkswagen emissions scandal, the long-term sales outlook at Johnson Matthey remains sketchy to say the least.
I am also far from bullish concerning the investment appeal of Ophir Energy (LSE: OPHR) thanks to the significant supply/demand imbalance washing over the oil market. The fossil fuel producer has seen its share price shuttle 28% lower since January, erasing gains printed at the start of the year as crude values have toppled once again.
The Brent benchmark remains perched worryingly around the $50 per barrel mark, unable to break convincingly higher as OPEC’s determination to grab market share — combined with solid US output and rising Russian output — crimps investor sentiment. And should Chinese data continue to disappoint, I expect Ophir Energy to keep on tumbling as its robust cash pile dwindles and the economic viability of its blockbuster projects come under scrutiny.