Amid the current turmoil unfolding in stock markets around the world, the FTSE UK Index had its quarterly review in early March.
FTSE Russell, the global index provider, announced that three FTSE 250 stocks would receive promotion to the coveted FTSE 100 index.
As well as dishing out these promotions, the index provider also announced the three companies receiving a demotion to join the FTSE 250 index. In the rebalance, Kingfisher, NMC Health, and TUI AG left the FTSE 100.
Let’s meet the three companies joining the giants and consider if they’re worth a place in a portfolio.
Fresnillo
Fresnillo (LSE: FRES) is a Mexican-based precious metals mining company incorporated in the UK and headquartered in Mexico.
At the beginning of March, the company announced a plunge in full-year profits due to lower ore grades. This comes as a result of a slowdown in production at one of its principal mines in Mexico. Pre-tax profits fell by 63% and revenue remained almost flat.
Despite a recent spike in the price of gold and promotion to the FTSE 100, I don’t think the outlook for Fresnillo looks too healthy.
With the broader macroeconomic environment reaming uncertain for the foreseeable future, I’d be inclined to look elsewhere for stocks that are likely to grow in times to come.
Intermediate Capital Group
Intermediate Capital Group (LSE: ICP) is a global alternative asset manager. The firm focuses on providing capital to help companies grow through private and public markets.
The company’s share price rampaged upwards from January 2017 through January 2020, skyrocketing by around 168%. This outstanding performance was continually propped up by impressive yearly results.
However, with the outbreak of the coronavirus the share price plummeted by around 60%. Since then, it has staged a minimal bounce back but still remains around 54% down on previous highs.
With a healthy price-to-earnings ratio of 9.87, I think the bumper sell-off experienced by Intermediate Capital Group was based on unrealistic downside scenarios.
The company remains in a solid position to build sustainable growth. What’s more, I really like the look of their business model, which enables the Group to deliver its strategic objectives as it has done so successfully thus far.
Pennon Group
Pennon Group (LSE: PNN) is a British water utility and waste management company based in Exeter.
From August 2019 to February 2020, the firm’s share price increased by 70% on the back of solid full-year results. Profit before tax was up 22.7% and statutory earnings per share increased by 17.6%.
As with the index as a whole, Pennon has taken a hit from the market crash caused by the coronavirus. However, a 14% reduction in the share price is striking in comparison with much larger losses for the majority of companies in the FTSE 100.
Ultimately, I believe the company looks set to be relatively unaffected by the current market conditions. Water and waste management are necessary jobs that don’t vanish when economic uncertainty arises.
All things considered, Pennon Group has an attractive platform for continued growth. It’s is a solid buy for me, especially considering the reduced price.