Today I am looking at the investment prospects of four recent FTSE casualties.
Hulking household goods play Unilever (LSE: ULVR) saw its share price sink 2% last week as traders trickled out of the door, and the stock has shed further ground in Monday trading. But I believe investors should pay little heed to these negative moments — after all, some weakness is to be expected as profit-takers pile in, the manufacturer having gained 12% in less than six weeks.
Indeed, I reckon Unilever remains a red-hot growth stock that should take pride of place in any investment portfolio. Sure, the business may trade on an elevated P/E multiple of 21.7 for 2015 despite an anticipated 13% earnings uptick. But thanks to its heavy emerging market bias, not to mention the formidable pricing power of brands like Dove soap and Ben & Jerry’s ice cream, I reckon profits should head to the stars in the years ahead.
Electricity network provider National Grid (LSE: NG) has also seen its share value tick lower during the previous trading week, and the business clocked up a 3% price loss in the period. But like Unilever, I think some of this weakness can be attributed to previous strength, and I am convinced the company offers terrific value at present levels.
National Grid deals on a very reasonable P/E rating of 15.3 times for the year to March 2016 due to an anticipated 1% earnings rise, while a projected 43.7p per share dividend creates a market-bashing yield of 4.9%. With the business steadily building its asset base across the UK and US, and RIIO price controls helping to limit cash seeping out of the business, I believe the power play is in great shape to deliver chunky returns.
Thanks to fresh weakness in the gold price, precious metals producer Randgold Resources (LSE: RRS) saw its shares descend 9% between last Monday and Friday. The ‘safe-haven’ asset scrambled back below the psychologically-critical $1,100 per ounce marker to three-month lows on Friday following strong US jobs news, data that heightened expectations of a Fed rate rise next month.
And I believe the prospect of further gold price pressure can be expected as the US dollar could be primed for further gains, while jewellery and bar demand from the critical Indian and Chinese markets keeps on languishing. Randgold Resources is anticipated to endure a 19% earnings slide in 2015, resulting in a mega-high P/E ratio of 29.3 times. Given that the firm also faces escalating mining costs, I believe the gold play represents anything but a shrewd stock bet at the present time.
Concerns over a slowing global economy have dented shipping giant Clarkson (LSE: CKN) since the summer, and although share prices have recovered some ground since, a chunky 11% fall last week underlines the increasing pressure facing the sector. Indeed, the business warned last week that “the dry bulk market remains severely depressed and the low oil price continues to put offshore operators under significant pressure, giving rise to contract slippage and cancellation.”
Clarkson now expects pre-tax profit to clock in at £50m for 2015, indicating only a small second-half improvement from the £23.6m rise punched in January-June. With industry peer Maersk reporting today that profits halved in the third quarter thanks to market overcapacity and low freight rates, and data from China steadily worsening, I reckon the shipping industry remains a risk too far. Clarkson is anticipated to record a 12% earnings slump in 2015 alone, resulting in an unappealing P/E ratio of 18.2 times.
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Royston Wild owns shares of Unilever. The Motley Fool UK owns shares of and has recommended Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.