Today I am looking at whether investors should splash the cash on three recent FTSE divers.
Royal Dutch Shell
Despite the introduction of new measures from the People’s Bank of China to resuscitate the ailing economy, embattled oil giant Royal Dutch Shell (LSE: RDSB) experienced fresh share price weakness last week. The country is the world’s number two consumer of the black stuff, meaning such action could provide a huge demand boost for the likes of Shell.
Still, the London business saw its shares drop 1% between Monday and Friday despite the news, and the stock also shrugged off an eighth successive weekly drop in the US rig count. Resilient OPEC pumping means regional stockpiles remain around record highs, while North American inventories continue to grow thanks to insipid demand. And as output at the United States’ most lucrative fields steadily rises, I expect the market imbalance to keep on worsening, a terrifying omen for Shell’s revenues outlook.
Hikma Pharmaceuticals
Medicines play Hikma Pharmaceuticals (LSE: HIK) was also forced onto the back foot last week, the stock conceding 3% during the five-day trading period. In total the business has seen its share price fall an eye-popping 18% during the corresponding point in September, but I believe this weakness represents a terrific bargain-hunting opportunity.
Hikma is clearly on a strong upward trajectory thanks to the galloping popularity of its Branded and Injectables division, while recent acquisitions in the UK and US have significantly boosted its product suite and development pipeline. On top of this, the firm is doubling-down on its operations in critical emerging markets, exemplified by its licensing deal with over-the-counter giant Vitabiotics in August to sell its labels in the Middle East and North Africa. I fully expect revenues at Hikma to explode as we look down the line.
Imperial Tobacco Group
And like the pharmaceuticals giant, I believe cigarette manufacturer Imperial Tobacco (LSE: IMT) can expect surging demand from developing regions to underpin robust earnings growth. Such territories are home to the vast majority of the world’s smokers, and with wealth levels in these places striding steadily higher, I naturally expect tobacco sales to follow suit.
Imperial Tobacco’s long-running restructuring drive is helping it to spearhead its gains from these markets, the business having closed down scores of underperforming local labels in favour of developing sales drivers like Davidoff and John Player Special. And this appears to be a sage strategy — underlying sales and volumes of these so-called ‘Growth Brands’ advanced 14% and 10% respectively in October-June alone.
On top of this, Imperial Tobacco is also ratcheting up its exposure to white-hot growth areas like e-cigarettes and caffeine strips, and its recent acquisition of vapour brand blu gives it the edge in the huge North American market. I believe that the business should continue delivering solid returns for some years to come as macroeconomic conditions improve.
