The Motley Fool

These were the worst performing shares on the FTSE 100 last week

Image source: Getty Images.

The FTSE 100 ended last week up by 1.3% at 7,188 points. After a long, sunny Bank Holiday weekend, investors seem to have shaken off Brexit fears and decided UK stocks are still worth buying — a view I share.

However, this rising tide didn’t lift all ships. A number of stocks drifted lower, while one firm shocked the market with a 29% fall. Let’s take a look at the news behind last week’s biggest FTSE 100 losers.

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...

Micro Focus International (-29%)

The Micro Focus International (LSE: MCRO) share price fell by 29% last week, after the FTSE 100 software group warned of a bigger-than-expected fall in sales. Revenue is now expected to fall between 6% and 8% this year, compared to a previous guidance for a 4% to 6% decline.

The company said that “a deteriorating macro environment” is causing customers to take longer to make purchasing decisions. Problems relating to the 2017 acquisition of the HPE software business also continue to cause “weak sales execution.”

The news shocked the markets because, at the start of July, the firm issued a much more upbeat statement and said trading was in line with expectations. My reading of this is that Micro Focus has lost or failed to win a major contract over the summer, upsetting its plans for the year.

In other circumstances, I’d suggest this might be a buying opportunity. In this case, I think the firm’s $3.8bn net debt means the risks are too high. The board is starting a strategic review. My view on the stock is also under review. Until we know more, I’m staying on the sidelines.

Aveva Group (-4%)

My second firm is also a software group. The Aveva Group (LSE: AVV) share price slipped 4% lower, despite issuing no news. One possible explanation is investors trimmed their position in the stock after seeing Micro Focus’s warning of weaker market conditions.

Although Aveva’s customer base is more tilted towards heavy industry than Micro Focus, there’s some overlap between the two firms’ target markets.

Another possibility is that investors are starting to feel Aveva stock may be getting expensive. That’s a view I’d share. The AVV share price has risen by more than 35% over the last year. The stock now trades on 35 times 2019/20 forecast earnings, with a dividend yield of just 1.2%. Although I rate Aveva highly as a business, it looks too expensive for me at current levels.

British American Tobacco (-3%)

British American Tobacco (LSE: BATS) — which owns brands such as Dunhill, Lucky Strike and Camel — faces a number of challenges at the moment. The group has not yet made much progress at reducing the £46bn debt pile that resulted from the 2017 acquisition of Reynolds American.

Investors are also concerned about the wider outlook for tobacco stocks. Regulators are taking a closer interest in new products such as vapes and ‘heat not burn’ type cigarettes. Meanwhile, smoking rates continue to fall in developed markets.

For contrarian investors who believe BAT can adapt and survive, the current situation could be a buying opportunity. The group’s profit margins remain high and cash generation is strong. The stock is priced modestly, on less than nine times forecast earnings and with a 7.3% dividend yield.

This won’t be an investment that appeals to everyone. But I think there’s probably some opportunity here.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Micro Focus. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned 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 enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.