The Motley Fool

The Peril Of Holding Onto ARM Holdings Plc, Royal Mail plc & Antofagasta plc

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Søren Kierkegaard once said that to dare is to lose one’s footing momentarily, but to not dare is to lose oneself. 

With that in mind, considering that the FTSE 100 is badly hurt, and that the rainy days might be here to stay — in which case, should you buy ARM Holdings (LSE: ARM) and Antofagasta (LSE: ANTO) instead of Royal Mail (LSE: RMG)

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Real Life

Record sales at Apple are great news for ARM, whose current stock price of 919p reflects broader market volatility than any fundamental issue with the business. In fact, you could buy ARM stock now and pay about 36x and 30x its forward earnings for 2015 and 2106, respectively, but trading metrics drop by 30% once they are based on projections for its adjusted operating cash flow.

That is not a lot, really, while the net present value of future cash flows to equity yields my personal price target of 1,150p. 

Between 2015 and 2017, ARM is expected to add about £200m of revenue each year — trailing sales stand at £795m. On top of that, roughly £100m of operating income will be generated, which should yield a compound annual growth rate of between 25% and 28% for earnings per share and dividends per share.

There’s no debt on its books. 

If that’s not enough, you must either forget about equity investing or you must be looking for a riskier investment — if the latter is the case, then Antofagasta could be your top pick.

Mr Copper 

Mr Copper is giving sleepless nights to Antofagasta shareholders, but they should live in the knowledge that the value of their holdings, which is currently very close to their 52-week low of 476p, is destined to be more resilient than that of all other major miners given that Anto’s capital structure — how much debt/equity the miner holds on its books — is much more balanced than that of its rivals. 

That is not to say that their lower dividend yield is much safer, however. 

Still, you may well be prepared to stay put if you are invested or you could be brave and buy its shares, which are currently priced at forward earnings and adjusted operating cash flow multiples of 15x and 5.5x, respectively. Either way, to not dare is to lose oneself — remember that? 

Boring

I have a problem with Royal Mail’s strategy of late — I did not digest its venture with Amazon — and I also have an issue with the limited room of manoeuvre that the mail and express sector offers. It doesn’t look good out there, as recently proved by the performance of UK Mail.

And, based on most metrics, you can’t even say that RMG looks dirt cheap at its current price of 450p!

So, I’d probably end up being bored to death checking out its stock price over the next decade, just trying to figure out how get out of the investment at anywhere between 450p and 550p. That’s a possible scenario over the medium to long term, in my view, unless some brave buyer placed a bid and the UK governments was willing to accept it. 

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings and owns shares in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.