Should you buy last week’s winners Lonmin plc (+15%), Bovis Homes Group plc (+12%) and Whitbread plc (+9%)?

Royston Wild considers whether Lonmin plc (LON: LMI), Bovis Homes Group plc (LON: BVS) and Whitbread plc (LON: WTB) can keep on charging.

| 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.

Today I am considering the investment case for three recent Footsie risers.

Platinum bomb

Precious metals digger Lonmin (LSE: LMI) saw its shares surge again last week, with bubbly market appetite coming despite another plunge in platinum prices.

The dual-role metal — it’s used both as an investment metal as well as a key component in various industries and the jewellery market — slipped back towards the critical $1,000 per ounce marker as the US dollar strengthened.

Recent Federal Reserve comments suggesting that interest rates could be back on the agenda has propelled the greenback higher, and I believe additional strength may materialise in the months ahead, applying fresh pressure to the metal. And of course fears over the health of the Chinese economy may cause further problems for platinum values.

Lonmin rose last week after announcing strong progress in its cost-cutting mission, a programme that helped it record a $21m pre-tax loss during October-March. This marked a vast improvement from the $118m loss clocked up in the same period last year.

However, the number crunchers expect Lonmin to remain in the red in 2016, with losses of 9 US cents per share currently pencilled in.

And with the digger still facing a murky revenues outlook, I reckon investors hoping for a bottom-line bounceback may end sorely disappointed. I believe Lonmin’s surging share price provides a terrific selling opportunity.

Building beauty

I am far more optimistic concerning the profits prospects of Bovis Homes (LSE: BVS), however.

The housebuilder has gained significant traction since its AGM earlier this month, its share price taking in four-and-a-half-month peaks just shy of £10 in the process. And this comes as little surprise, at least in my opinion. Bovis announced at the meeting that

housing market conditions remain positive with strong demand from home buyers who are benefitting from good access to mortgage finance.”

With construction activity still failing to meet this brilliant demand, the City expects Bovis to keep chalking up stellar earnings rises — indeed, a 16% earnings rise is projected for this year alone, resulting in a mega-low P/E rating of 8.9 times.

And with the business boasting a market-mashing yield of 4.6% for 2016, I reckon there is plenty of room for Bovis’s stock value to keep sprinting.

Coffee colossus

Bed and beverage play Whitbread (LSE: WTB) also touched levels not seen since the start of 2016 last week, keeping its spritely performance in May going.

Investors are becoming bullish sales continue to surge across the group. Whitbread saw revenues canter 12% higher in the 12 months to February 2016, with sales at its Costa coffee chain rising 15.9% and takings at Premier Inn increasing 12.9%. And I expect revenues to keep rising as Whitbread expands these brands across the globe.

This view is shared by the abacus bashers, and an earnings expansion of 4% is pencilled in for 2017 alone. A consequent P/E rating of 17.3 times for may be slightly toppy on paper, but I believe this represents fair value when you factor in the electric growth potential thrown up by Whitbread’s ambitious expansion programme.

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.

Royston Wild 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.

More on Investing Articles

Close-up of British bank notes
Investing Articles

£8 per year in extra income for life, for each £100 invested today? Here’s how!

Christopher Ruane explains how he would aim to set up extra income streams for the rest of his life by…

Read more »

Photo of a man going through financial problems
Investing Articles

With a £20K Stocks and Shares ISA, I’d target £1,964 in annual dividends like this

With an annual passive income target close to £2,000, our writer explains how he'd put a £20K Stocks and Shares…

Read more »

Illustration of flames over a black background
Investing Articles

Down 63% in 2024, what’s going on with the Avacta (AVCT) share price?

2024 has been a difficult year for many companies in the biotechnology sector, with the AVCT share price down heavily.…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Here’s how I’d invest £800 the Warren Buffett way!

Christopher Ruane learns some lessons from super-investor Warren Buffett he hopes could improve his own stock market performance.

Read more »

British Isles on nautical map
Investing Articles

Michael Burry just bought 175,000 shares in this FTSE 100 company

Scion Asset Management announced a $6.5bn stake in BP this week. But what could Michael Burry be seeing in an…

Read more »

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

£5,000 in savings? Here’s how I’d aim to start making powerful passive income today

With a cash lump sum to invest, this Fool lays out how he'd start making passive income. He also details…

Read more »

Investing Articles

Just released: our 3 top small-cap stocks to consider buying before June [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

My best FTSE 250 stock to consider buying now for passive income while it’s near 168p

This is a rare stock with a growing underlying business and a fat dividend yield – it’s worth consideration for…

Read more »