These days investors have access to virtually unlimited data, from which, one would hope to be able to make wise investment decisions. However, the opposite can often be the case with investors selling out of their holdings on a less-than-favourable piece of news, slightly disappointing results or the belief that their chosen company is heading for ruin by aimlessly buying up companies in order to keep growing at the expense of shareholder value.
Often, this can spook investors and market commentators alike, causing a stampede for the exit and often a sizeable drop in the share price, which often serves to prompt others to sell, too.
Below, I take a look at three FTSE 100 constituents that appear to me to be starting to regain their appeal to those nervous investors.
A chip off the old block
Holders of Cambridge-based chip designer ARM Holdings (LSE: ARM) have needed to place heavy weights on their hands since the company released its interim results, which the market clearly thought were below expectations at the end of July.
The shares took a bath and subsequently underperformed an underperforming FTSE 100, not helped by general market volatility and concerns about China.
To be fair, there are not many businesses that generate earnings per share growth of 31% at the half-year stage, but there are not many businesses as highly rated as ARM, either. Pleasingly, the company spent the summer buying back over 4 million shares at a discounted price.
Following the Q3 results, the shares have rallied, and currently sit slightly higher than the pre-interim results price at the close on 21 July.
While the shares trade on an eye-watering 30+ times forecast earnings, this is significantly less than the shares have historically change hands for, presenting what I believe to be an opportunity.
Pharma out of favour
Investors in rare disease and other specialty conditions player Shire (LSE: SHP) have been rubbing their hands since US suitor Abbvie walked away from the deal last October. Shares in the company dropped to under £38 per share, only to rally to over £57 at the start of August.
There are a number of factors at work here. The market is worried about Shire’s unsolicited offer to acquire Baxalta, given the potential size and complexity of the deal. Additionally, there has been disappointment following news that the FDA has delayed approval for lifitegrast, used to treat dry eye disease. These issues have been compounded by a wider sell-off in the biotechnology sector, centring on concerns over US drug pricing.
With the shares now trading on a more reasonable 16 times forecast earnings, now could well be the time to jump aboard. True, there are risks going forward if management overpay for acquisitions, additionally, there is little comfort from a sub 1% yield.
However, in my view most of the concern is now in the price – I wouldn’t be surprised to see the shares re-rate from here.
Starting to perk up?
Investors in Whitbread (LSE: WTB), the company behind brands like Costa Coffee, Table Table and Premier Inn, were unlikely to have enjoyed looking at their shares, which seemed to be unable find many friends amongst vary investors during the summer.
Investors saw the value of their shares fall from just under £55 each to just over £45, a drop of around 18%
However, a solid set of interim results released last week — showed double-digit revenue, underlying profit and dividend growth — seemed to encourage investors to reassess the company and its shares, which have risen almost 10% since.
Despite this rise, I still think that there is money to be made from here as the shares regain their composure going forward.
What’s a Fool to do?
As you can see from the three-month chart below, the short-term performance of the share prices of these businesses under review today has been lacklustre. I don’t expect that to continue for long.
Indeed, drag that same chart out over five years and it is really quite easy to see why I fully expect these quality companies to continue to outperform going forward.
