The terrible events in Ukraine are rightly dominating the news. The biggest FTSE 100 fallers this year have links to Russia, so I’m avoiding them.
Instead, I’m focusing my attention on lead index shares whose prospects look much safer to me. Here are three of this year’s big fallers I’m interested in buying for my portfolio in March.
A slump too far?
My first pick is postal and parcel group Royal Mail (LSE: RMG), whose share price has fallen by more than 20% so far this year.
I think this pullback has been driven by market fears that rising wage and fuel costs will put pressure on Royal Mail’s profits. There’s also some uncertainty about whether parcel volumes can be maintained at the levels seen during the pandemic.
Rising fuel costs are likely to hit all transport firms. But an update on 25 January suggested that parcels volumes are holding up well. CEO Simon Thompson said parcel revenue was down by just 5% during the final three months of 2021, compared to the same period in 2020.
Royal Mail shares now trade on just six times forecast earnings, with a 6% dividend yield. That looks too cheap to me. I’d buy this FTSE 100 faller for my portfolio at this level.
A cheap, market-leading business?
Shares in fellow FTSE 100 advertising giant WPP (LSE: WPP) hit a three-year high of 1,231p at the start of February. The WPP share price has since fallen by more than 15% as the market has delivered a harsh judgement on the outlook for the year ahead.
I think this is probably too cautious. Although I am worried the conflict in Ukraine could lead to a wider economic slowdown, I don’t think WPP’s profits are likely to be hit too hard.
Earnings rose by 60% last year as CEO Mark Read continued to deliver a strong recovery from the pandemic. Cash generation was very strong, supporting a 30% dividend rise.
Broker forecasts suggest WPP’s earnings will rise by 35% in 2022, as the business returns to normal. For me, the shares look decent value today, trading on 11 times 2022 forecast earnings with a 3.5% dividend yield. I’d be happy to buy WPP.
This FTSE 100 faller has exciting plans
UK share platform Hargreaves Lansdown (LSE: HL) describes itself as “the original disruptor”. The company helped to create the direct-to-consumer business that allows private investors to have direct access to a wide range of funds and shares.
Hargreaves is still the market leader, but these days it has a lot more competition. Growth has slowed. To make matters worse, the record trading volumes seen during the pandemic are returning to more normal levels.
CEO Chris Hill is planning a major revamp to try and reboot the group’s growth rate. He’s planning to expand Hargreaves’ in-house fund range and build “the best digital and human advice service”.
It sounds to me like Hargreaves Lansdown could become a mini-fund manager, focused on the needs of private investors who want to manage their own affairs. I reckon this could be a successful strategy.
Hargreaves shares have fallen by around 30% over the last year. That’s left the stock trading on 20 times forecast earnings, with a dividend yield of 3.7%. I reckon that’s reasonable value for a business with 40%+ profit margins. I may pick up a few shares in March.