Stock markets have recovered their mojo, with the FTSE 100 now rising for three days in succession. The bears are in retreat as fears of a US interest rate hike recede.
With the FTSE 100 down 12% from its April peak and trading at around 15 times earnings, it still doesn’t look overvalued. If the market delivers a traditional end-of-year surge, now may look like a great buying opportunity in retrospect.
If you are feeling more bullish, the following two stocks may be a good way to play the upswing.
Aberdeen’s Anguish
As a leading emerging markets investment fund specialists, Aberdeen Asset Management (LSE: ADN) has been hit hard by troubles in China, with its share price down 28% over the past year. That has also left it temptingly priced at less than 10 times earnings, especially with the yield at a beefy 5.55%. The share price is up 5% over the last three days, as investors wake up to these numbers and embrace risk again.
Talk of fresh stimulus from China could drive the share price even higher, although the authorities can’t postpone the day of reckoning forever, and further volatility is inevitable. Even if markets do recover Aberdeen still has plenty of hard work ahead, as it will take time to replace recent outflows, which measured a massive £10bn in the most recent quarter, as institutional investors cut their exposure to Asia.
Aberdeen is largely at the mercy of global market movements, although worryingly, some of its top funds have made matters worse by underperforming their benchmarks. It has the security that comes with a plump net cash cushion and that generous dividend allows investors to sit things out until emerging markets start swinging again. In the meantime, a takeover can’t be completely ruled out, especially if the share price continues to stagnate.
Lansdown Races
Hargreaves Lansdown (LSE: HL) is up 6% over the last three days as sentiment revives and the UK’s leading investment platform shows it can still make money in tough times. Although recent weeks have taken their toll, its share price has been far more robust than Aberdeen’s, up 7% over the last 12 months and 183% over five years. Private investors are less flighty than institutional ones, they don’t offload their Isas at the first whiff of grapeshot.
Quite the reverse, as Hargreaves has just reported a 13% increase in client growth over the year to 30 June and an 18% jump in assets. That helped offset £20m of lost revenues following its decision to cut client fees, which shows it has the financial strength to compete in a market where consumers keep a beady eye on charges.
Markets weren’t too worried by a 5% drop in operating profits to£199m, as Hargreaves Lansdown has demonstrated its solidity in bad times as well as good. The downside is that at 33 times earnings and yielding just 1.89%, it isn’t exactly available at a knockdown price right now. Even bullish investors will have to grit their teeth to bite at that price.