With the FTSE 100 sliding further — it’s down another 30 points to 6,388 as I write — there must surely be some bargains to be had, mustn’t there?
After all, when markets are bearish towards stocks, the good get sold off with the bad, and it can be a good time remember Warren Buffett’s advice to “Be greedy when others are fearful“. So let’s have a look at three companies whose shares have recently fallen to 52-week lows:
It’s not been a good 12 months for Rolls-Royce Holdings (LSE: RR) (NASDAQOTH: RYCEY.US), whose shares slipped to a low of 786p on 23 October, for a loss of 32% over the past 12 months.
The latest drop was triggered by a profit warning on 17 October, which told that a deterioration of conditions and tightening Russian trade sanctions are likely to lead to a full-year fall in revenue of 3.5% to 4% — previous guidance had suggested revenue would be flat. Underlying profit should now be flat, excluding around £60m in exchange rate losses and a one-off £30m from the firm’s Marine division.
Tate & Lyle
The low for Tate & Lyle (LSE: TATE) of 571.5p came on 17 October, and at the time of writing it’s back up 10p to 581.5p.
The shares are down 26% over 12 months, after a couple of precipitous falls following profit warnings. The latest, on 23 September, told us that “prolonged and severe winter in the US” had been more damaging than expected, and the company faces additional non-recurring costs of £20m in its second quarter — that’s £40m for the year so far.
Chief executive Javed Ahmed described the half as “extremely disappointing“, and it’s impossible to disagree.
Construction firm Kier Group (LSE: KIE) hits its low of 1,457p on 16 October, and it’s actually recovered to 1,528p today. It’s the smallest of our three 12-months falls, of a relatively modest 14%.
Full-year results released in September were pretty reasonable, with revenue up 51% and underlying pre-tax profit up 54%, but there seems to be a general bearish mood afflicting the sector right now.
Which is best?
Kier Group looks unfairly punished to me right now, but it’s not my favourite of the three.
Flat earnings would see Rolls-Royce shares on a forward P/E of about 12.5, with a dividend yield of a bit under 3% forecast. That looks low to me, and the bulk of Buy recommendations out there agrees — Rolls-Royce is my pick of these three.
Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Tate & Lyle. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.