Why has the US election result had such an impact on these UK shares?

Roland Head looks at the biggest movers in the FTSE 350 today. What’s behind their 10%-plus moves?

| 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.

It may be too soon to try and guess which stocks will be the biggest winners and losers from the Donald Trump’s presidency. But that hasn’t stopped Mr Market from triggering 10% share price moves for two FTSE 350 stocks today. Both companies seem likely to be affected by some of his flagship policies.

What might this mean for shareholders?

This sweet deal could end

Sweetener group Tate & Lyle (LSE: TATE) is down 12% at the time of writing, making it the biggest faller in the FTSE 350.

Tate & Lyle has a very large business in the US. Last year, 75% of the group’s sales came from there, where it produces high fructose corn syrup (HFCS) for the food and drink industries. It also exports a significant amount of HFCS from the US to Mexico. According to broker estimates, about 10% of Tate’s earnings are generated in Mexican pesos.

Tate & Lyle now faces the risk that its export trade to Mexico could be disrupted, if Mr Trump fulfils his campaign promise to alter US trade deals. Even if this doesn’t happen, the sharp fall seen in the value of the Mexican peso since Tuesday could affect sales of US goods in Mexico.

Tate & Lyle is only just getting back on its feet after a series of profit warnings. Last week’s interim results showed that adjusted pre-tax profit rose by 22% to £140m during the first half of the year. The weaker pound boosted first-half figures by £15m, and was expected to provide a £40m boost to full-year profits.

Is the market overreacting?

Today’s 12% fall has taken Tate & Lyle’s share price back to levels last seen at the end of June. The gains seen since then have been wiped out, but the shares are still worth 10% more than they were at the start of 2016.

Today’s sell-off may have gone too far. So far, nothing has really changed for Tate & Lyle. But there’s definitely a risk that part of the group’s business could be disrupted. With the shares trading on a forecast P/E of 16 and offering a yield of 3.8%, I don’t see any reason to buy.

This stock is rising — here’s why

FTSE 100 equipment hire firm Ashtead Group (LSE: AHT) has bounced 11% higher today. The reason for this is simple. About 90% of Ashtead’s operating profit comes from its US hire business, Sunbelt Rentals.

Mr Trump is expected to announce plans to invest fresh cash in major infrastructure projects when he’s elected. This should boost demand for Sunbelt’s construction equipment. If this happens, then Ashtead’s plan to increase its geographical coverage by 50% over the next five years could prove to be very well timed indeed.

Of course, Ashtead’s growth plan is already well known. Sunbelt revenue rose by 20% last year, while operating profit climbed by 22%. Ashtead shares have risen by 21% so far in 2016.

Despite this strong performance, Ashtead looks quite reasonably priced. The shares currently trade on about 13 times forecast earnings with a 2% yield. This stock may be worth a closer look.

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.

Roland Head 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

Investing Articles

Would Warren Buffett buy BP shares, as oil excitement grows?

Warren Buffett is a big investor in the oil business, and BP's performance has been attracting investor attention in results…

Read more »

Cropped shot of an affectionate young couple posing with a bunch of flowers in their kitchen on their anniversary
Investing Articles

Here’s how long-term loyalty to UK shares can lead to dazzling returns!

The most successful UK and US share investors buy shares to hold for the long term, as this report shows.

Read more »

Investing Articles

NatWest has just smashed brokers’ dividend forecasts!

After NatWest delivered a Valentine’s Day surprise to investors, our writer thinks the experts may have to raise their dividend…

Read more »

Investing Articles

The NatWest share price slips in early trading despite positive FY 2024 results. What’s the deal?

The NatWest share price is down slightly this morning after the bank released its final results for 2024. Our writer…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

My Legal & General shares have climbed just 7% — so how come I’m sitting on a 20% gain?

Harvey Jones' trading account is showing only a modest return on his Legal & General Shares, but on drilling down…

Read more »

Investing Articles

Prediction: the BP share price could rise in 2025 (or it might fall!)

Following this week’s release of the energy giant’s 2024 results, our writer reviews the prospects for the BP (LSE:BP.) share…

Read more »

many happy international football fans watching tv
Investing Articles

What’s gone wrong with the FTSE 100’s ‘King of Trainers’?

Feeling the pain of a 28% drop in the JD Sports share price over the past three months, our writer…

Read more »

Investing Articles

Is it too late for investors to consider buying these outstanding FTSE 100 shares?

Stephen Wright wonders whether now's the time to consider buying shares in the FTSE 100’s outstanding companies, despite some high…

Read more »