Can You Beat The Market With These Out-Of-Favour Stocks: Blur Group PLC, Kingfisher plc And A.G. Barr plc?

Should you buy, sell or hold Blur Group PLC (LON: BLUR), Kingfisher plc (LON: KGF) and A.G. Barr plc (LON: BAG)?

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The market’s declines over the past three weeks have thrown up some fantastic bargains for investors to take advantage of. 

So, here are just five former market darlings that have fallen from grace during the past few months and which now trade at, or near, 52-week lows.

Trading improving

Controversial company Blur Group (LSE: BLUR) plunged to a 52-week low at the beginning of this week, as investors continued to express concern about the sustainability of the company’s business model. However, the company’s shares have rebounded in the past two days, after Blur issued an upbeat fourth quarter and full-year trading update on Wednesday. 

In the announcement, Blur revealed that it had been able to significantly reduce group cash burn to an underlying $1.5m in Q4 2015 from $3.6m in Q3 2015, which has, to some extent, alleviated concerns about the company’s cash burn. Further, the company revealed in its trading update that reported earnings before interest, tax, depreciation and amortisation (EBITDA) for 2015 are expected to be slightly ahead of market expectations with sequential, quarterly improvement. 

So, after years of floundering, Blur Group finally seems to be heading in the right direction. Still, analysts don’t expect the company to report a profit in the near-term and for this reason, the company’s shares are difficult to value at present. 

Wait and see

Kingfisher (LSE: KGF) plunged to a new 52-week low this week after the company warned on profits and announced a new five-year transformation programme. The plan is designed to unlock a £500m sustainable annual profit uplift, but it will cost the group £50m hit in the first year, and between £70m and £100m in the second year.

Kingfisher plans to return to the majority of the additional profits generated from this transformation plan to shareholders. Management is targeting a capital return of £600m over the next three years, most likely via a share buyback in addition to the annual ordinary dividend. Kingfisher currently supports a yield of 2.8%. 

Unfortunately, many analysts don’t believe that Kingfisher’s transformation plan will produce the results management is targeting and it’s easy to see why. Kingfisher’s pre-tax profit hasn’t grown for the past five years, despite an aggressive cost-cutting and restructuring plan. The shares currently trade at a forward P/E 16.6 which looks expensive. 

Overall, it might be wise to avoid Kingfisher until the company’s second major transformation plan starts to yield results. 

Quality at a reasonable price

After a difficult 2015, shares in A.G. Barr (LSE: BAG) hit a 52-week nadir last week as broader market declines dragged the company’s shares lower. 

For long-term investors, thought, A.G. Barr could be a great investment at present levels. The soft drinks group is a relatively defensive investment and sales are still growing. Like-for-like sales for the 18 weeks to 28 November were up 3.9%, putting a difficult start to the year behind the company. 

A.G. Barr’s shares currently trade at a forward P/E of 17.6, which isn’t overly expensive for a business that’s been able to grow profits and shareholder equity at a compound annual rate of 10% for the past five years. 

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 Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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