The fact that big share price falls are both common and quick to pass, compared to the length of bull markets, might not be much comfort right now. After all, there’s a chance things could get worse before they get better.
Having said this, not every company’s share price will necessarily suffer as a result of the coronavirus outbreak or other global fears. Here are three that could prove resilient.
“Trending substantially ahead”
Companies operating in the spread betting/Contracts for Difference space are worth watching. Today, one of the three listed on the London market — Plus 500 (LSE: PLUS) — issued a positive update. Yes, you read that right.
As a result of the fear that’s spread throughout the investing world over the last few days, the FTSE 250 constituent stated that it had seen “a significant increase in levels of customer trading activity” before going on to say that its financial performance over Q1 is“trending substantially ahead” of the same period last year. You’re not seeing language like that from many companies at the moment!
Of course, no one knows if this momentum will last. That said, Plus’s shares were trading on what appeared to be a very cheap forecast price-to-earnings (P/E) ratio of a little under 9 before markets opened this morning and yielding 5.8%. It’s next scheduled to report to the market in April.
With Bank of England Governor Mark Carney warning that disruption to supply chains could mean a hit to UK growth prospects, it’s understandable if many businesses are getting nervous. Should a prolonged downturn come to pass, one company that may benefit is insolvency specialist Begbies Traynor (LSE: BEG).
Even if you’re confident that the coronavirus outbreak won’t bring the economy to its knees, there’s always the impact of troublesome Brexit negotiations to ponder. Back in January, the company released research showing that just under half a million UK businesses were already in ” significant distress” — a rise of 81% since the beginning of 2016 (the same year as the EU referendum).
Despite this, shares in Begbies certainly haven’t been immune to the recent sell-off and have now fallen back to prices not seen since last spring. This leaves them trading at 13 times earnings. A potential 2.8p dividend in the current financial year has the stock yielding 4.2%.
Call up a chart of its share price performance over the last week and you’ll see why funeral services provider Dignity (LSE: DTY) is the final pick of today’s shares that could protect your portfolio from the current crisis. Its price is currently up 4% since Monday, supposedly on the belief that demand for its what it does will remain stable, even during tough economic times.
As always, there’s no sure thing when it comes to investing and Dignity could become another victim of the sell-off in time. That said, the fact that it was already trading on a little less than 9 times forecast earnings could mean it suffers less severe selling pressure than other, more highly-rated stocks.
Regardless of what happens next, it’s worth being aware that the company has faced increased competition over the last few years. The shed-load of debt on the balance sheet is another potential red flag. Last year, the latter came in at almost twice the value of the whole company!
Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.