Will a slowing China cause pain for ARM Holdings plc, Jimmy Choo plc and Standard Life plc?

Should you avoid these 3 stocks because China is slowing down? ARM Holdings plc (LON: ARM), Jimmy Choo plc (LON: CHOO) and Standard Life plc (LON: SL).

| 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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

With China’s GDP growth rate having slowed in the last couple of years and forecast to continue this trend in future, many investors are shying away from China-focused stocks. The logic is clear: since China is no longer the fast-growth powerhouse it once was, there may be better investment options available elsewhere in the world.

However, this view ignores the fact that China offers a tremendous opportunity for consumer goods companies and financial services providers. Certainly, its spending on infrastructure and capital expenditure projects is falling. But with a rising middle class, demand for pensions, smartphones and clothing is likely to soar.

This is good news for Standard Life (LSE: SL), with the diversified financial services company attempting to position itself for growth within the region. With a large number of Chinese set to retire over the next few decades, Standard Life could see demand for its pension services increase while the penetration of other financial products is also set to rise over the coming years.

With Standard Life forecast to increase its bottom line by 10% next year, it trades on a price-to-earnings-growth (PEG) ratio of only 1.1. This indicates that its shares offer a very wide margin of safety and that they could deliver stunning capital growth over the medium-to-long term. Furthermore, Standard Life has a yield of 6.2% and given the opportunity for growth in China, its dividend prospects are impressive, too.

Passion for fashion

Another stock that should benefit from China’s shift towards a more consumer-based economy is Jimmy Choo (LSE: CHOO). The luxury brand that’s best-known for its high-heeled shoes is intent on diversifying its product range so as to broaden the appeal of its brand and tap into a new customer base. This has the potential to boost its bottom line and with the company forecast to increase its earnings by 26% this year and by a further 20% next year, it seems to be moving in the right direction.

With demand for luxury clothing and accessories in China likely to rise as earnings increase, Jimmy Choo could see its top and bottom lines increase at a rapid rate over the next decade. And with its shares trading on a PEG ratio of only 0.9, they seem to offer tremendous upside potential.

Growth potential

Meanwhile, ARM (LSE: ARM) should also be a beneficiary of China’s booming middle class, with smartphone sales likely to return to strong growth over the medium-to-long term. However, even if this doesn’t take place, ARM seems to be well-positioned to grow its bottom line via other technology segments. For example, it’s investing heavily in its capabilities within the Internet of Things space, which it thinks could positively catalyse its profitability.

While ARM is a relatively mature company, it’s still expected to grow its earnings by 43% in the current year. This puts it on a PEG ratio of only 0.6 and with an excellent track record of growth, ARM seems to be worth a much higher price than that at which it currently trades.

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.

Peter Stephens owns shares of ARM Holdings, Jimmy Choo, and Standard Life. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Up 14% in 2024, what’s next for the Lloyds share price?

This Fool takes a closer look at what prompted the Lloyds share price to rise this year, and offers her…

Read more »

Investing Articles

5 FTSE 100 stocks to consider for a lifetime of passive income

I see lots of cheap dividend stocks in the FTSE 100 right now, but prices are starting to rise. Here's…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

3 growth stocks I’m desperate to buy as the FTSE 100 dips

Never waste a dip, says Harvey Jones. Three of his favourite growth stocks have fallen over the last month and…

Read more »

Investing Articles

I’d use a £10K ISA to try and generate £900 in dividends annually like this!

Christopher Ruane explains how he would invest a Stocks and Shares ISA in blue-chip companies to try and set up…

Read more »

Investing Articles

Here’s how I’d build a second income stream worth £1,228 a month by investing £10 a day!

A second income stream could come in handy later in life. This Fool explains how she’d build one by investing…

Read more »

Investing Articles

5 FTSE 250 stocks I’d buy for a lifetime of passive income

Here's why I think the FTSE 250 could be the best UK stock market index to go for in 2024…

Read more »

Union Jack flag triangular bunting hanging in a street
Investing Articles

Buy cheap FTSE shares, says HSBC

Analysts at HSBC have upgraded their rating of FTSE stocks and reckon the blue-chip UK index could carry on powering…

Read more »

Couple working from home while daughter watches video on smartphone with headphones on
Investing Articles

It could be worth buying the dip for this FTSE 250 stock, down 7% today

Jon Smith spots a sharp drop in a FTSE 250 stock but explains why this could just be a blip…

Read more »