Today I am looking at whether investors should cash in on recent weakness at four FTSE divers.
Standard Chartered
Thanks to escalating emerging-market fears, shares in banking goliath Standard Chartered (LSE: STAN) have dropped 20% during the past four weeks. But heavy price weakness is nothing new, with the bank’s failure to resuscitate its ailing fortunes in Asia having smashed investor sentiment in recent years. Indeed, Standard Chartered saw pre-tax profit tank a further 44% during January-June, to $1.8bn thanks to further impairments.
Plenty of uncertainty continues to swirl around the firm, even if the installation of Bill Winters as chief executive provides Standard Chartered with a fresh approach. From concerns over rising regulatory bills, through to the strength of the balance sheet — a situation that many expect to be resolved with the raising of new equity — investors still have plenty to digest, and I believe stock selectors should adopt a ‘wait and see’ approach before piling into the bank.
Weir Group
Matching the severe share price weakness of the mining and oil sectors, pump builder Weir (LSE: WEIR) has haemorrhaged much of its value over the past month — the firm is now dealing 17% lower than levels seen at the same point in August. This comes as no surprise as resources plays across the globe slash capital expenditure, a scenario that looks set to continue as profits struggle in light of tanking commodity prices.
Weir advised last month that revenues slumped 13% during the first half, to £1bn, and an 18% collapse in new orders suggests that the tough environment is here to stay for some time yet. Thanks to what the business describes as “the most severe downturn in oil and gas markets for nearly thirty years,” and despite a renewed focus on R&D, I do not expect the firm’s fortunes to improve any time soon as its end markets struggle.
Old Mutual
Unlike Standard Chartered and Weir, I reckon Old Mutual (LSE: OML) is a great pick for those hunting for bargains. The life insurance giant has seen its stock price erode 16% since the middle of August, the business having being caught up in the sell-off affecting many companies that are reliant on developing markets.
I believe that the market is missing a trick here, however, and that Old Mutual’s growing presence across Africa should deliver brilliant long-term gains. Indeed, the firm saw funds under management advance 5% in January-June, to £335.7bn, with profits from South Africa rising 14%, and those from the rest of the continent 31%, during the period. With wealth levels rising in the region and financial product penetration still relatively low, I am convinced Old Mutual has plenty left in the tank.
Prudential
Insurance experts Prudential (LSE: PRU) has suffered the same fate as Old Mutual more recently thanks to rising fears over South-East Asia, and the London firm has seen its share price sink 10% in the past four weeks. I reckon the market is overlooking the terrific growth prospects that the firm’s pan-global presence afford, however, a factor that helped power Prudential’s operating profit 17% higher in January-June to $1.9bn.
Prudential saw profits rise at double-digit rates across each of its main markets, and a 17% uptick in Asian profits — to £632m — underlines the abundant opportunities of this key growth region. And thanks to the steady emergence of a rising middle class, I believe Prudential is in a sweet spot as demand for protection and savings products canters steadily higher.