Looking at the FTSE 100‘s 52-week range, the index is trading pretty close to its lowest point in the last year.
That’s hardly surprising, given what’s been happening in the stock market lately.
- High inflation is driving up costs causing consumer spending to drop.
- Rising interest rates are making access to external capital more expensive.
- Supply chain disruptions are causing global manufacturing delays.
- Labour shortages are hurting profit margins.
- Volatility in currency exchange rates is damaging earnings.
With all of these problems happening simultaneously, it’s no wonder the FTSE 100 index has been tumbling. However, it’s important to remember that these issues are ultimately short-term in nature. And there are some early indicators that the current situation is slowly improving.
In other words, the index may be primed for a comeback in the coming months. As such, the window of opportunity to capitalise on low stock prices may already be closing. With that in mind, here are two leading shares that I believe are primed for an impressive long-term recovery before reaching new heights.
Footsie’s top generics pharma giant
Hikma Pharmaceuticals (LSE:HIK) has had a pretty rough year, with its shares basically being slashed in half. Part of this adverse movement is likely just general stock market volatility. But another reason why investors seem to be bearish is the state of its Generics division in the US.
Following increased competition, this part of the company has been underperforming. Fortunately, its Injectables and Branded segments continue to steal the show. And that’s pretty encouraging, given this is where management’s long-term strategy is focused.
The Generics division is responsible for around a third of sales, so seeing a double-digit slowdown is concerning. However, the group is launching a series of new products that are expected to turn things around in the coming months.
Assuming this is successful and its other segments continue to outperform, then this business could be trading at quite an attractive discount today. Of course, there’s no guarantee. And the share price may tumble further if the group fails to meet expectations.
With all that said, I believe the risk is worth the reward for my portfolio. Hikma has a solid track record of successful product launches, and given the continued double-digit growth in its other divisions, the collapse in share price makes this business look like a bargain buy if I had capital at hand to invest today.
Return to darling status?
For years Melrose Industries (LSE:MRO) was considered a top-tier engineering business. As a reminder, the group acquires struggling enterprises and attempts to turn them around before selling them later for a higher price.
Unfortunately, engineering was one of several industries to be absolutely decimated by the pandemic. And even today, the FTSE 100 firm continues to endure disruptions that have decreased its share price by another 37% in the last 12 months.
But following some swift business restructuring, Melrose appears to be on the mend. Profitability is still a shadow of its former self but is significantly higher than in 2020.
Management has taken on debt to fuel its recovery, which does add additional risk, especially with interest rates on the rise. Yet in my opinion, the worst has already passed for the company. And assuming no more spanners get thrown into the works, I believe Melrose remains an excellent stock to have in my portfolio.