The FTSE 100 and FTSE 250 both crashed over 11% last week. Some individual stocks fell much harder. Holiday firm TUI plunged almost 30%. Across both indexes — the FTSE 350 — just three companies’ shares ended the week higher than they started.
NMC Health (LSE: NMC) was the only riser in the blue-chip FTSE 100 index, up 9.7%. Hunting (LSE: HTG) and Plus500 (LSE: PLUS) were the two FTSE 250 risers. They posted gains of 4.3% and 14.1% respectively. Should investors snap up these crash-defying stocks?
Very muddy waters
Unfortunately, in the case of NMC Health, the term ‘blue-chip’ can only be used loosely. Investors in the UAE-based hospitals business have been on a roller-coaster since influential short-seller Muddy Waters published a scathing report on the company in December.
Despite a subsequent extraordinary string of developments at NMC, and admissions by it, the share price was enjoying a mini-rally, while markets were crashing last week. It was up 9.7% by the close of day on Wednesday.
However, the company released an after-hours statement at 5.17pm. This has been discussed in detail by my colleague Karl Loomes. My short conclusion is that, due to unapproved activities by its recently-resigned directors, and discrepancies and inconsistencies in bank statements and ledger entries, NMC currently has no idea of its true financial position.
Before the market opened on Thursday, the Financial Conduct Authority agreed to the company’s request for a temporary suspension of its shares while it seeks to clarify its financial position. The situation looks grim to me. Never mind the 938p of the temporarily suspended shares, I’d sell at almost any price.
Highly undervalued
There are fears the spread of the coronavirus could trigger a broad economic downturn. Alongside crashing stock markets, the price of oil slumped. The shares of oil and oil-related companies may not have been the heaviest fallers, but they did worse than the overall market’s 11% drop.
Oil equipment and services firm Hunting was heading the same way as its peers early in the week. However, its shares jumped higher when it released its annual results on Thursday. This was despite it saying “the outlook for 2020 remains uncertain.”
Hunting has an experienced management team and a strong balance sheet. It’s announced a share buyback programme for the first time in its history as “the board considers the current share price highly undervalues the group.” I agree, and rate the stock a ‘buy’ on 10.7 times forward earnings at a current price of 318p.
Attractive on the face of it
Plus500’s shares soared on the back of a trading update released on Friday. The company’s online platforms enable retail speculators to bet on rising or falling prices — in things such as shares, commodities and crypto-currencies — by trading contracts for difference.
Plus500 said that “following the recent period of heightened volumes of trading across global financial markets,” it had seen “a significant increase in levels of customer trading activity.”
The idea of investing in a company that thrives when markets are volatile — and your other shares may be falling — is attractive on the face of it. As is a rating of 10 times forward earnings at a share price of 950p. However, due to my longstanding concerns about the company’s business model, and regulatory risk, I’ll continue to avoid the stock.