It’s fair to say FTSE 100 stocks have experienced mixed fortunes in recent months. Two falling shares I believe investors should seriously consider snapping up are Rentokil (LSE: RTO) and Unilever (LSE: ULVR). Here’s why they could bounce back nicely.
Pest control
Rentokil shares have struggled in recent months. They’re trading for 419p as I write. Over a 12-month period, the shares are down 19% from 521p to current levels. Last month’s trading update pushed the shares down 31% from 610p to current levels. I think this was an overreaction and presents a great buying opportunity.
Rentokil’s interim results a few months earlier set high expectations. So when Q3 results came in with volatility impacting its core market, North America, and the business stating that performance might be “marginally below” expectations, the shares dipped substantially. Revenue growth came in at 53.3%, compared to the 70% expected. I think the market was unforgiving based on how the share price reacted.
In the short term, Rentokil is at the mercy of macroeconomic issues. These include rising interest rates and soaring inflation. The former in particular is impacting Rentokil in North America and there are no signs of this changing any time soon.
However, Rentokil shares look like a good buy-and-hold opportunity, in my opinion. They offer a passive income with a dividend yield of just below 2%. Plus, continued market volatility could see FTSE 100 stocks cutting or cancelling returns. Plus, the shares are now trading on a price-to-earnings ratio of 18.
Finally, Rentokil’s market dominance, experience over several decades, as well as geographical footprint and diversification are too good to ignore. At this stage, current volatility could make holding any shares a bumpy ride. However, if any market recovery were to occur, I’d expect to see the shares flying high once again in the long term.
Consumer goods giant
Unilver’s shares recently hit 52-week lows, which is surprising to me but again, looks like a great buying opportunity. As I write, they’re trading for 3,919p. At this time last year, the shares were trading for 3,947p, which is pretty much the same position. However, since market volatility took hold, they’ve dropped 11% from 4,443p in February to current levels.
Unilever could see demand for its products lessen due to tougher economic conditions. After all, many of its popular products are considered branded, premium goods. The rise of essential, cheaper ranges could attract the wallet-conscious consumer. Plus, rising costs and supply chain issues won’t help the firm’s performance and share price in the short term at least.
I firmly believe the cream eventually rises to the top. Unilever being the cream in this instance. Its profile, presence, diversification and experience of navigating tough economic periods cannot be ignored.
Plus, when I think that Unilever shares are trading on a price-to-earnings ratio of 12, they look well-priced to me. Plus, a passive income opportunity with a yield of 3.9% is enticing too.
Overall there are lots of FTSE 100 stocks out there that present buying opportunities in my eyes. These are just two investors should take a closer look at and consider buying.
