Why WM Morrison Supermarkets PLC, Barclays PLC and Vodafone Group plc Are In The FTSE 100 Dumps For 2014

Tesco is the supermarket that has made all the headlines in 2014, for all the wrong reasons. But when it comes to its well-publicised share price crash, we find Morrisons  (LSE: MRW) actually not far behind it.

Failing to compete

Morrisons’ shares, in fact, have lost 33% since the start of 2014 to fall to 181p, and that’s even after a 16% recovery since the end of October. Considered by many to be the UK’s least appealing supermarket, Morrisons has suffered badly from the price-cutting times we’re now in — and things have not been helped by its tardiness in getting online shopping off the ground and its last place in spotting the benefits of the convenience store format.

And if that’s not scary enough, Morrisons’ shares are still on a forward P/E of above 14, with a swingeing drop of 50% in EPS forecast for the year to January 2015. There’s still a very big 7% dividend yield predicted, but it will probably only just be covered.

This is a good bank?

Barclays (LSE: BARC) (NYSE: BCS.US) is more of a surprise to me, as it’s looked very strong in its recapitalisation over the past couple of years and is on for a return to earnings growth this year. Yet by 16 October its shares were down 24% — they’ve since recovered a little, but the price is still down 12% since the start of the year to 243p.

The problem has really been the continuing revelations of banking misbehaviour, and there’s a fear factor built into the share price in case of future fines. But we’re looking at a forecast P/E of under 12, dropping to just 9 based on 2015 expectations — and at the same time, we should see a well-covered dividend yield grow from 2.8% to 4%. 

Is that a share that’s undervalued? It looks that way to me.

Where’s 4G?

Vodafone (LSE: VOD) (NASDAQ: VOD.US) is another that’s pulling it out of the fire as we reach the end of the year. By mid-October its shares were down 25%, but we’ve seen a recovery since then to a fall of just 9% since the start of 2014.

In Vodafone’s case things just look too uncertain after its previous performance was dominated by the sale of its Verizon Wireless stake. What’s left of the company is set for a 64% drop in EPS for the year to March 2015, which would give us a heady P/E of over 35! And a 7% recovery penciled in for the following year would drop that only as far as 33.

Forecast dividends are only around half covered by earnings, so we really are looking at a valuation based on what a future Vodafone with its full-fledged 4G network is going to bring. But the Vodafone we have now is facing falling revenues and a stretching share price. Not one of my favourites for 2015.

I wonder how many millionaires' portfolios held these three stocks this year? Even with a few short-term losses, quality companies could still take you to millionaire status.

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Alan Oscroft has no position in any shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.