Saying some FTSE 100 shares have crashed in 2020 is perhaps stating the obvious. Rolls-Royce and International Consolidated Airlines spring to mind as the big casualties. Today, however, I’m examining three others that have dropped heavily in 2020 but which don’t make the headlines in quite the same way.
FTSE 100 shares I like
I’ll start with the one I’ve felt most positive about over the years. It’s Melrose (LSE: MRO). Melrose invests by buying engineering companies it thinks are seriously underperforming. It then tries to turn them round to generate a profit. It’s been very successful at it over the years, but it’s clearly a business facing challenges.
The Melrose share price has been picking up over the past few months. But it’s still down 34% over the year. Year-by-year earnings figures don’t mean a lot, because profits are to a large extent dictated by the timing of acquisitions and disposals. So in a year like 2020, earnings should be close to zero. Melrose, I think, is one of those FTSE 100 shares where a long-term horizon is not just preferable, but of absolute necessity.
Dividends are up and down too, for the same reason. So I wouldn’t rely on Melrose for steady income. But that’s fine by me. I’d buy now.
Events management, ouch
Next up is Informa (LSE: INF). Its FTSE 100 shares have also been picking up, but they’re still down 37% on the year. Informa is in the business information business. As well as publication, it also manages events and exhibitions. And they’ve largely halted during the pandemic.
So, an 80% drop in forecast earnings comes as little surprise. But it’s still positive. And I reckon any company that can remain in profit this year has an advantage. Analysts are expecting Informa’s comeback to be gradual, with 2021 earnings still around half of 2019’s. But I would expect a staged recovery for a company like this. Its business customers themselves need to get back on their feet first. And I’d expect an Informa profit recovery to follow once FTSE 100 shares in general get closer to normality.
We’re looking at a 2021 price-to-earnings of 22. I see that as good value for a company at that stage of recovery. I can see it coming down quite rapidly.
FTSE 100 share price potential
Finally, I turn to ITV (LSE: ITV), whose shares are also down 37% this year. But yet again, the ITV share price has been regaining some lost ground. ITV’s fall has actually pushed it into the FTSE 250 and away from FTSE 100 shares. But it started the year as a FTSE 100 stock, so I think it’s fair to consider it one of the top index’s casualties.
So what now? ITV has recorded three years of falling earnings. And for Covid-19 year, analysts have it marked down for a further drop of more than 30%. The dividend is also on the slide. It looks set to yield just 2% this year, even after the share price fall.
There’s a modest rise indicated for 2021, and forecasts suggest a dividend rebound to yield close to 6%. I’m wary of such forecasts. But they do suggest a 2021 P/E of under nine, which I think shows a decent safety margin. I rate ITV as a long-term recovery buy. And I think it could rejoin the rest of the FTSE 100 shares before too long.
