Time To Sell BHP Billiton plc, Standard Chartered plc & Rotork p.l.c.?

Royston Wild explains why pressured plays BHP Billiton plc (LON: BLT), Standard Chartered PLC (LON: STAN) and Rotork p.l.c. (LON: ROR) look set to fall.

| More on:

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.

Today I am looking at three stocks in danger of shuttling lower.

BHP Billiton

Shares in metals and energy giant BHP Billiton (LSE: BLT) have enjoyed a stellar run of late, and the business has seen its share price elevate 12% during the past four weeks alone. Quite why the market is piling back into the stock is beyond me, however, and I believe the time is here for savvy investors to book profits as commodity-related data continues to worsen.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Fears over slowing Chinese demand and plentiful production levels have pushed iron ore prices — a market from which BHP Billiton derives almost 60% of total earnings — back below $50 per tonne in Thursday business, hitting levels not seen since July. And along with other key commodities such as petroleum and copper, the City’s brokers expect much more price weakness to materialise.

Needless to say earnings at BHP Billiton are not anticipated to improve any time soon, and the business is expected to follow the 52% dip in the year to June 2015 with a 50% dip in the current period. And with the business dealing on an elevated P/E ratio of 29.1 times prospective earnings, well above the value watermark of 15 times, I believe the firm’s deteriorating market outlook should send share prices nosediving sooner rather than later.

Standard Chartered

But BHP Billiton has not been the only casualty of slowing economic growth in Asia, as banking goliath Standard Chartered (LSE: STAN) would surely testify. Fears over cooling emerging regions pushed the firm to 14-year troughs back in August, but the stock has since galloped higher and has gained a total of 19% during the past month alone. I do not believe this leap can be justified, however.

In its latest move to streamline the group, Standard Chartered announced the closure of its equity derivatives and convertible bonds arms just this week, and follows on from the exit of its institutional cash equities, equity research and equity capital divisions earlier in January.

While a welcome step in terms of cost reduction, not to mention sharpening StanChart’s focus on its core markets, the business’s persistent revenues weakness, combined with heavy impairments in Asia, should be of utmost concern to investors. Meanwhile, persistent chatter over a rights issue, as well as the threat of further regulatory action surrounding earlier sanction breaches, also continue to do the rounds.

The City expects the bank to endure a 41% earnings slide in 2015, and while a consequent P/E ratio of 13.8 times is hardly terrible, this still represents a premium to the wider banking sector.

Rotork

Shares in engineering play Rotork (LSE: ROR) has also enjoyed a bump higher in recent weeks despite issuing a profit warning in September, the company having gained 10% since the end of September. However, thanks to persistent problems in the oil and gas industries I reckon this strength will prove nothing more than temporary.

The valvebuilder announced last month that “the trading environment in the second half to date has been challenging across most of our key markets and geographies,” prompted by a series of project deferrals and cancellations. Indeed, oil leviathan BP’s decision this week to slash capex to between $17bn and $19bn through to 2017 illustrates the stress affecting balance sheets across the industry, and the prospect of further crude price weakness could drive Rotork’s sales performance still lower.

This view is shared by the number crunchers, and the Bath-based business is expected to chalk up a quite astonishing 92% earnings slip in 2015 alone, resulting in an elevated P/E multiple of 18.4 times. And I do not believe Rotork’s bottom line should pick up any time soon as oversupply in the oil market worsens.

More on Investing Articles

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

I bought these 4 cheap shares for a market recovery

After months of sitting on my hands, I've finally taken the plunge by buying four cheap shares. Of course, their…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

Here’s why I’m buying more shares in one of my best stocks to buy!

This Fool explains why he is planning on adding further shares of one of his holdings to boost his portfolio.

Read more »

Bearded man writing on notepad in front of computer
Investing Articles

Just 6% of investment trusts make positive return in H1! What should I do?

The returns from investment trusts have so far disappointed this year. Here's why I plan to continue splashing the cash…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

Could this FTSE 100 stock be a bargain to buy and hold?

This Fool believes there are some excellent bargains to be had on the FTSE 100 and details one he is…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

Are these the best income shares to buy in 2022?

Andrew Woods wonders if he should add these two companies to his portfolio to create a consistent income stream.

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

At 41p, are Lloyds shares now too cheap to miss?

As interest rates rise, Andrew Woods asks if now is the time to load up on Lloyds shares.

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

2 dirt-cheap UK shares to buy right now!

Stock market volatility remains very high. This presents excellent opportunities for investors to buy mega-cheap UK shares like these two…

Read more »

Shot of an young Indian businesswoman sitting alone in the office at night and using a digital tablet
Investing Articles

Should I buy soaring Abrdn stock? Or am I too late?

Abrdn stock jumped 8% in Wednesday morning trading. The share price has tanked this year, so maybe its fortunes are…

Read more »