Time To Sell BHP Billiton plc, Standard Chartered plc & Rotork p.l.c.?

Today I am looking at three stocks in danger of shuttling lower.

BHP Billiton

Shares in metals and energy giant BHP Billiton (LSE: BLT) have enjoyed a stellar run of late, and the business has seen its share price elevate 12% during the past four weeks alone. Quite why the market is piling back into the stock is beyond me, however, and I believe the time is here for savvy investors to book profits as commodity-related data continues to worsen.

Fears over slowing Chinese demand and plentiful production levels have pushed iron ore prices — a market from which BHP Billiton derives almost 60% of total earnings — back below $50 per tonne in Thursday business, hitting levels not seen since July. And along with other key commodities such as petroleum and copper, the City’s brokers expect much more price weakness to materialise.

Needless to say earnings at BHP Billiton are not anticipated to improve any time soon, and the business is expected to follow the 52% dip in the year to June 2015 with a 50% dip in the current period. And with the business dealing on an elevated P/E ratio of 29.1 times prospective earnings, well above the value watermark of 15 times, I believe the firm’s deteriorating market outlook should send share prices nosediving sooner rather than later.

Standard Chartered

But BHP Billiton has not been the only casualty of slowing economic growth in Asia, as banking goliath Standard Chartered (LSE: STAN) would surely testify. Fears over cooling emerging regions pushed the firm to 14-year troughs back in August, but the stock has since galloped higher and has gained a total of 19% during the past month alone. I do not believe this leap can be justified, however.

In its latest move to streamline the group, Standard Chartered announced the closure of its equity derivatives and convertible bonds arms just this week, and follows on from the exit of its institutional cash equities, equity research and equity capital divisions earlier in January.

While a welcome step in terms of cost reduction, not to mention sharpening StanChart’s focus on its core markets, the business’s persistent revenues weakness, combined with heavy impairments in Asia, should be of utmost concern to investors. Meanwhile, persistent chatter over a rights issue, as well as the threat of further regulatory action surrounding earlier sanction breaches, also continue to do the rounds.

The City expects the bank to endure a 41% earnings slide in 2015, and while a consequent P/E ratio of 13.8 times is hardly terrible, this still represents a premium to the wider banking sector.


Shares in engineering play Rotork (LSE: ROR) has also enjoyed a bump higher in recent weeks despite issuing a profit warning in September, the company having gained 10% since the end of September. However, thanks to persistent problems in the oil and gas industries I reckon this strength will prove nothing more than temporary.

The valvebuilder announced last month that “the trading environment in the second half to date has been challenging across most of our key markets and geographies,” prompted by a series of project deferrals and cancellations. Indeed, oil leviathan BP’s decision this week to slash capex to between $17bn and $19bn through to 2017 illustrates the stress affecting balance sheets across the industry, and the prospect of further crude price weakness could drive Rotork’s sales performance still lower.

This view is shared by the number crunchers, and the Bath-based business is expected to chalk up a quite astonishing 92% earnings slip in 2015 alone, resulting in an elevated P/E multiple of 18.4 times. And I do not believe Rotork’s bottom line should pick up any time soon as oversupply in the oil market worsens.

But whether or not you share my cautious take on Rotork, or indeed any of the firms mentioned above, I strongly recommend you check out this totally exclusive report that highlights a broad range of FTSE winners waiting to deliver exceptional returns.

Our “5 Dividend Winners To Retire On” wealth report highlights a selection of incredible stocks with an excellent record of providing juicy shareholder returns. Among our picks are top retail, pharmaceutical and utilities plays that we are convinced should continue to provide red-hot dividends.

Click here to download the report -- it's 100% free and comes with no further obligation.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Rotork. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.