What a roller-coaster ride the past month has been for shares. After President Trump unveiled hefty trade tariffs on 2 April (‘Liberation Day’), global stock markets plunged. On 9 April, the FTSE 100 closed at 7679.48 points, down 13.8% from its all-time high on 3 March.
The FTSE fights back
As I write (on Friday, 2 May), the Footsie stands at 8,583.58, up 11.8% since 9 April. But the index is still 3.7% below its record high of two months ago.
What’s remarkable is that the UK’s blue-chip index has enjoyed its longest winning streak since its creation in January 1984. The index has closed up for 15 days in a row, including today, which has never happened before. As a lifelong investor, I used to say, “always the odd down day along the way”, but that’s yet to happen since 9 April. Whoa.
Of course, though this winning run is of historical interest, it’s not really significant other than for its duration. The FTSE 100 has seen stronger rises (and steeper) falls over shorter timeframes, notably during the great market meltdowns of October 1987, 2000-03, 2007-09, and spring 2020.
London’s main market index is now ahead 4.9% over six months, 5.1% over one year, and 49% over five years. Add in cash dividends of around 3.5% and these returns comfortably beat keeping my money in a high-interest savings account.
Our new Footsie firm
Alas, I was unable to seize many brilliant bargains during this latest bout of stock-market volatility. I mistakenly believed my family had only a small cash reserve at hand, when it turns out we had an unusually large sum available to invest. That’ll teach me to pay more attention to my wife, who administers our family portfolio.
That said, we did jump in by buying one FTSE 100 stock that plunged last month. After a poorly received set of results sent its shares plummeting, Bunzl (LSE: BNZL) lost more than a quarter of its value (-25.6%) on Wednesday, 16 April. I felt this market reaction was overdone, so I convinced my wife to buy while there was blood in Bunzl’s streets.
We acquired our stake in this British distributor of workplace supplies at 2,275p a share on this ‘Black Wednesday’. As I write, the stock trades at 2,360p, 3.7% above our buy price (including stamp duty and dealing costs). While we are off to a positive start with this holding, I aim to keep these shares for the long run.
For me, Bunzl could turn out to be another ‘fallen angel’ — an otherwise solid company whose stock sustains a temporary setback. Bunzl shares now trade on undemanding fundamentals, valued at 15.8 times trailing earnings and delivering an earnings yield of 6.3%. This means that their dividend yield of 3.1% a year is covered twice by historic earnings, which is a solid margin of safety.
Of course, I could be wrong. The problems that caused Bunzl’s share price to plunge last month — weaker revenues and falling margins in North America — could worsen in a drawn-out trade war. Also, the group paused its £200m share buyback with £85m unused. However, three company insiders have bought big post-crash, which gives me confidence. Only time will tell whether I am right…
