I’m looking to add bargain-priced blue-chips to my Stocks and Shares ISA, and three immediately jump out of me. All of them had a tough June, their shares falling between 8% and 15%. This looks like a buying opportunity to me.
Luxury goods brand Burberry Group (LSE: BRBY) was the second-worst performer on the entire FTSE 100 in June, crashing 15.11%. Only B&M European Value Retail did worse, down 18.83%. Burberry has had a rotten year too. Over 12 months, it’s down a thumping 58.94%.
Today’s economic uncertainty, especially in China, slammed profits after tax, which plunged from £492m in 2022 to £271m in 2023.
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Bargain blue-chips
Fashion is by its nature cyclical and Burberry has fallen out of style lately, while its marketing efforts have repeatedly misfired. The luxury market is supposed to be recession-proof because the super-rich can afford to carry on spending, but Burberry hasn’t quite cracked the ultra-high-end of the market.
I bought its shares twice in May, hoping to take advantage of its troubles, but jumped in too soon. I’m down a brutal 23.33%. I hope to trim that loss by averaging down on Burberry shares in July. Trading at 12.25 times earnings – half their former valuation – and yielding a bumper 6.16%, they look like a buy for me. I think Burberry should bounce back, but it will take time.
I’m also thinking of topping up my stake in struggling pharmaceuticals group GSK (LSE: GSK). I bought the stock in March because I thought it looked ripe for a recovery after years of underperformance against soaraway rival AstraZeneca.
I then averaged down in June when the shares fell 10% on fears of litigation over its Zantac treatment. Now I’m wondering whether to have a third bite, with the stock falling another 4.06% last week alone. The culprit this time was a US health agency ruling that restricted the market for its Arexvy product. Overall, the stock is down 9.06% over the last year.
I think the market has overreacted. The shares look tempting priced at just 9.84 times earnings, with a solid yield of 3.79%. GSK should get there in the end. I see bumps along the road as buying opportunities, and don’t plan to waste this one.
Another LSE opportunity
I’ve been itching to buy private equity specialist Intermediate Capital Group (LSE: ICG) for two years, now. So what held me back? Its rocketing share price. I felt like I had missed out on the momentum.
That’s less of a worry today, with the share price down 8.86% in the last month. However, it’s still up 59.33% over 12 months. It shows just how well the company has been doing, with group profits up 132% to £258.1m in 2023. Performance fee income soared 276% to £73.7m.
I expected the stock to be super-expensive as a result, but instead it’s trading at a modest 13.48 times earnings. That reduces the fear that I’m overpaying.
Private equity can be risky. If interest rates stay higher for longer, Intermediate Capital Group could struggle to match last year’s share price surge. This is a volatile sector, but recent slippage could be my chance. I’m keen to buy all three cut-price stocks. It’s time for a summer spree.
