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Should I buy last week’s 10 biggest FTSE 100 fallers?

Financial markets around the world went into panic mode last week. The UK’s FTSE 100 crashed 11.1%. Of course, some stocks performed much better than average and some much worse.

In this article, I’ll look at the 10 biggest fallers. They tell us a lot about the sectors investors are most fearful of. Should we be greedy contrarians, and look to buy stocks in these smashed sectors in anticipation of high returns in the longer term? I can tell you right now, I certainly think some are bargain buys!

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Double-digit fallers galore

The table below shows the 10 biggest fallers, their sectors and current share prices. It also shows their forward price-to-earnings (P/E) ratios and dividend yields.

 

Sector

Share price fall (%)

Current share price (p)

P/E

Yield (%)

TUI

Travel & leisure

-29.5

600

7.5

5.3

International Consolidated Airlines

Travel & leisure

-24.2

472

4.6

5.7

easyJet

Travel & leisure

-24.1

1,100

10.4

4.7

WPP

Media

-22.3

753

8.1

8.0

Carnival

Travel & leisure

-19.1

2,435

7.3

6.4

M&G

Asset management

-18.7

199

7.4

9.0

Whitbread

Travel & leisure

-18.3

3,894

17.5

2.6

Legal & General

Life insurance

-17.2

260

7.8

7.2

JD Sports Fashion

Retail

-16.1

737

19.6

0.3

Evraz

Mining

-15.8

326

6.1

10.9

Big sector theme

As you can see, there’s a big sector theme, with travel & leisure stocks supplying five of the top 10 fallers, including four of the top five. The spread of the coronavirus is already having a visible impact on this sector. Travel restrictions, and instances of cruise ships and hotels in lockdown, have been big news stories.

I’m looking for companies I think have good growth prospects for the long term, and strong debt ratios relative to their peers for navigating potentially severe turbulence in the nearer term. On this basis, I’d be happy to buy budget airline easyJet, leading cruise ship operator Carnival and Premier Inn owner Whitbread. I’m not quite so enamoured of TUI and International Consolidated Airlines, but I can understand bargain hunters being interested.

Odd one out

The only company outside the travel & leisure sector in the top five fallers is advertising giant WPP. This is more down to poorly received results announced on Thursday than a sector thing. Fellow Footsie media firms ITV and Pearson performed relatively well during the week. I continue to rate WPP a ‘buy’, in the belief its still-newish chief executive is pursuing a credible restructuring strategy.

Crashing markets

The financial sub-sectors of asset management and life insurance were represented by big fallers M&G and Legal & General respectively. But other names in these sub-sectors were also weak, with Schroders, Standard Life Aberdeen and Prudential just outside the top 10. Of course, crashing markets aren’t generally helpful to companies in these sectors. Having said that, I’d happily buy asset manager Schroders for its conservative family stewardship, and insurer Prudential for its excellent long-term prospects in Asia.

Recession fears?

JD Sports Fashion, which I’d buy for its long growth runway, is the only retailer in the top 10 fallers. However, Next and B&Q owner Kingfisher weren’t far behind. Perhaps there are fears of a coronavirus pandemic triggering a global recession?

That such fears may be at work seems to be supported by the presence in the table of Russian miner Evraz at number 10, with peers Anglo American, BHP, Rio Tinto and Glencore all figuring in the top 20. Oil stocks BP and Shell also suffered heavier falls than the overall Footsie. There may be value among these, but Evraz, whose directors sold millions of shares last year, wouldn’t be my pick.

Finally, wherever you’re searching for market-crash bargains, happy hunting!

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Carnival, ITV, Pearson, Prudential, and Schroders (Non-Voting). 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.