These FTSE 350 shares have performed poorly over the last 12 months. Will they fall further or bounce back?

These two beaten-up FTSE 350 shares have had a terrible 12 months. Could there be worse to come or are they now perfectly placed to bounce back?

| 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.

These two FTSE 350 shares have fallen because of the Covid-19 pandemic. For investors that raises one big question: are they now good value and primed to bounce back, or could there be further pain ahead?

A FTSE 350 share that could bounce back 

The share price of Royal Dutch Shell (LSE: RDSA) has fallen by more than 55% over the last 12 months. Concerns over the price of oil, economic worries, fears over the future of the industry as environmental concerns move up the agenda, and lastly the cutting of the dividend, have all played a part in reducing the share price.

The falling share price means its shares have hit a 25-year low. The shares certainly appear cheap. They have a price-to-earnings of only around 6.

The risk is it will likely take a while for sentiment to return. However, oil has been out of favour before and share prices have bounced back. There’s still demand for oil, despite the focus on the green alternatives and Shell itself is keen to get involved in green and alternative energy. I think though it’s still unclear if that will ever offset reducing demand for oil over time.

In the short term I don’t know what the share price will do. Longer term, I expect it’ll bounce back. The falls of the last 12 months could well make now an ideal buying time. Although, with analysts turning negative on the stock it’s not without significant risk.

A share price that might continue to struggle 

2020 started so well for on-the-move food group Greggs (LSE: GRG). The share price was rising strongly and then came Covid-19. Since then the share price has retreated.

The group recently revealed that like-for-like sales in company-managed shops averaged 76.1% of 2019 levels in the four weeks to 26 September. Sales were 71.2% of the 2019 level in the 12 weeks to the same date.

What’s next? Given sentiment is driving the share price in the short term it’s hard to predict where the share price will go over the next 12 months. The pandemic will be in control of what happens.

Longer term, I see Greggs as less affected by the smaller number of workers commuting than similar companies such as SSP Group. It has many more locations at places like petrol stations and high streets and provides cheaper food. This should make it better positioned once we have a vaccine, or lockdowns become less frequent – but this may be some way off.

For now then, I’d avoid the shares and wait to see what happens. Given the shares have recently jumped back up, another fall could be just around the corner.

Looking at Royal Dutch Shell and Greggs, both have the potential to bounce back. I prefer Royal Dutch Shell as the one with the potential to recover quicker and provide investors with income and growth. But there is risk, as much of its long-term value lies in a successful transition to green energy, which will require huge investment.

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.

Andy Ross owns shares in HSBC Holdings. The Motley Fool UK has recommended SSP Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

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

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »