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Should You Give Up On BHP Billiton plc, WM Morrison Supermarkets PLC & Bonmarche Holdings PLC?

In today’s article I’ll take a look at three companies which are making investors increasingly nervous.

Are BHP Billiton (LSE: BLT), WM Morrison Supermarkets (LSE: MRW) and Bonmarche Holdings (LSE: BON) falling knives, or could now be a good time to buy?

Bonmarche Holdings

Shares in ladieswear retailer Bonmarche Holdings fell by around 5% today, after the firm reported flat adjusted pre-tax profits of £6.4m for the first half of the year.

Encouragingly, like-for-like sales rose by 2% during the first half and by 6.1% during the second quarter. However, higher levels of discounting than during the same period last year meant that the firm’s pre-tax profit margin fell from 7.0% to 6.4%.

Shareholders were rewarded with an 8.7% rise in the interim dividend, to 2.5p, but the firm emphasised that the “market remains challenging”. Bonmarche said that meeting full-year expectations will be dependent on more normal patterns of trading between now and March.

So is Bonmarche a buy? Bonmarche shares have gained 22% since listing in November 2013, bucking the trend for recent IPOs to disappoint the market. On a 2015/16 forecast P/E of 13 and with net cash of £18m and rising, the stock doesn’t seem too expensive.

On the downside, the outlook seems uncertain and Bonmarche could face cost pressures from the national living wage. I view the shares as a hold.

BHP Billiton

Like most miners, BHP has fallen steadily this year as commodity prices have tumbled. Investors have become increasingly nervous about global demand.

What the market didn’t expect was that BHP, which has a decent reputation for safety, would be involved in a major mining disaster in Brazil. The collapse of a tailings dam at the Samarco iron ore mine has caused significant loss of life and widespread pollution.

BHP owned 50% of the mine but was not involved in its operation. The firm has said it will now look more closely at its other non-operated assets, but the damage has been done. Earnings forecasts have been cut and BHP shares now trade on a 2015/16 forecast P/E of 21, falling to 14 in 2016/17.

BHP’s 9% prospective dividend yield now looks increasingly hard to justify. Although a dividend cut isn’t a certainty, I would assume that a substantial cut is likely if buying these shares.

Morrisons

Aldi and Lidl now have a 10% share of the UK grocery market, according to the latest figures from Kantar Worldpanel. The decline of the big supermarkets looks likely to be longer and deeper than we expected.

I’ve been bullish on Morrison, but was I wrong? Consensus earnings forecasts for 2015/16 have been cut by 32% over the last 12 months. The shares have fallen by another 18% over that period to a 10-year low.

I’ve recently considered selling my Morrison shares, but have decided not to. Even after this year’s substantial impairments, they now trade at just 1.2 times tangible net asset value. Cash flow has remained positive and net debt has fallen to less than £2bn this year.

The shares offer a reasonable 3.3% yield at current prices and the firm’s chief executive, David Potts, seems committed. Mr Potts has spent £1.5m of his own cash on Morrison shares so far this year. I’m going to hang onto mine for a little longer.

However, while I do believe that both Morrison and BHP will eventually bounce back from their long-term declines, the timing of any recovery seems very uncertain.

It's no coincidence that none of the Motley Fool's analysts chose BHP or Morrison for their latest retirement wealth report, "5 Shares To Retire On".

The five companies they did select have all delivered far more stable and profitable performances for investors in recent months.

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Roland Head owns shares of BHP Billiton and WM Morrison Supermarkets. The Motley Fool UK has no position in any of the 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.