Broader stock markets have been falling hard as the number of cases related to the coronavirus outbreak has increased globally. Last week both the FTSE 100 and the FTSE 250 were each down over 11%. Indeed, many indices worldwide had their worst week since the 2008/09 financial crisis.
Nonetheless there were several London Stock Exchange (LSE) shares that have defied the market correction over the past five days. Today I’d like to discuss two of those companies so that you can do further due diligence to see if they should have a place in your portfolio now.
Education giant Pearson (LSE: PSON) closed the week up over 1%, which is some achievement given last week’s wider falls. On 21 February the FTSE 100 group released full-year results for 2019. Sales of university textbooks in the US, which accounts for approximately 25% of revenues, have been plummeting. Pre-tax profit was £232m, down from £498m year-on-year.
Many analysts have been encouraged by the publisher’s growing digital offering, which makes up about 7% of sales. But the performance in digital has simply not been strong enough to overcome the headwinds caused by the drop in US textbook sales, which since 2012 have shrunk by around a massive 90%.
Yet chief executive John Fallon believes Pearson is “now approaching the bottom of the valley in US higher education courseware”. And he is hopeful that the financial hit will lessen in the months to come. Thus many investors are wondering whether most of the bad news has already been factored-in to the stock.
In December, management had announced that Fallon would be retiring in 2020, ending a rather challenging seven-year tenure. He has been heading the analogue-to-digital transformation in a period that has seen the share price suffer. Its 52-week high is around 950p a share. Now it is hovering around 557p.
The stock currently offers a dividend yield of 3.5%. And the shares are expected to go ex-dividend on 26 March. the forward P/E stands at 11.9. Value investors may also be encouraged by P/B and P/S ratios of 1 and 1.1 respectively. Long-term investors might want to keep a close eye on PSON shares, especially in case of a potential drop in price following the announced leadership change.
As the carnage in the markets increased, Plus 500 (LSE: PLUS) bucked the trend and finished the week up over 12%. The FTSE 250 company operates an online trading platform for retail customers to trade contracts for difference (CFDs) globally on a wide range of financial instruments.
On 28 February, the group released an upbeat trading update that highlighted increased trading volumes due to the heightened volatility in the markets. Management said that its financial performance so far in the first quarter was consequently trending “substantially ahead” of the last quarter of 2019.
It comes as no surprise that, like other online platforms, its annual performance is highly dependent on financial market conditions providing sufficient trading opportunities. In other words, choppiness in the markets is good for business.
The company had made its stock market debut in July 2013. And since then it has had a stellar run. With the most recent gains, PLUS is up about 20% in the past 12 months. Despite the increase in price, its trailing P/E is only 7. The current stock price of about 950p supports a dividend yield of 5.7%. And on a final note, the group has a cash-rich balance sheet.
It’s official: global stock markets have been on a tear for more than a decade, making this the longest bull market in history.
But this seemingly unstoppable run of success poses an uncomfortable question for investors: when will the current bull market finally run out of steam?
Opinions are split about whether we’re about to see a pullback — or even a bear market — in 2020. But one thing is crystal clear: right now there’s plenty of uncertainty and bad news out there!
It’s not just the threat posed by the coronavirus outbreak that could cause disruption — Trump’s ongoing trade-war with China and the UK’s Brexit trade negotiations with the EU rumble on... and then there’s the potential threat of both the German and Japanese economies entering recession...
It all adds up to a nasty cocktail with the potential to wreak havoc and send your portfolio into a tailspin.
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tezcang has no position in any of the shares mentioned. The Motley Fool UK has recommended Pearson. 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.