Despite the recent market turbulence, the FTSE 100 is less than 5% lower than it was six months ago.
However, a number of individual firms have been hit much harder than this, and the three firms I’ll look at in this article have lost, on average, one-third of their market value since April.
Have these falls created any bargain buying opportunities?
Tullow OilÂ
Shares in Tullow Oil (LSE: TLW) peaked at 1,566p in February 2012 — and have since fallen by 65%!
I’ve alw
ays dismissed the company’s shares as being too expensive for new buyers, but I’m beginning to wonder whether that situation is changing.
Tullow has promising exploration assets in Gabon and Kenya and is currently developing previous discoveries in Ghana and Uganda. These could eventually add 280,000 barrels per day to Tullow’s gross production — the potential for significant long-term cash flow growth is clear.
Tullow’s earnings per share are expected to rise by around 50% this year and next year, and if this rate of growth continues, Tullow could look seriously cheap at 525p.
Sports Direct International
Shares in Sports Direct International (LSE: SPD) have fallen by around 25% since April, but I suspect this sell-off may prove to be a longer-term buying opportunity.
Spo
rts Direct’s earnings per share rose by 20% last year, and are expected to increase by 27% in 2014/15, and by at least 15% the following year.
Despite rapid UK and overseas growth, the firm’s net debt has halved since 2009, giving today’s business net gearing of just 25%.
Sports Direct’s operating margin of 9% is impressive for a value retailer, making the shares’ forecast P/E of around 15 look fairly reasonable, in my view.
Kingfisher
DIY giant Kingfisher (LSE: KGF) (NASDAQOTH: KGFHY.US) is a well-run retail business that owns B&Q, Screwfix, several French DIY chains, and some growing DIY stores further afield.
Kingfisher currently trades on a forecast P/E of 13, falling to less than 12 next year, and offers a decent prospective yield of 4%. Better still is the retailer’s balance sheet — Kingfisher reported net cash of £496m during the first half of this year, and currently trades at just 1.1 times its book value.
In my view, investing in Kingfisher should carry limited downside, as demand for DIY goods should remain firm, whichever direction the housing market moves in, while Kingfisher’s strong balance sheet should prevent any nasty financial shocks.