As I mentioned earlier, we’re in the silly season. During these summer months, markets can move in mysterious ways, as lower trading volumes reduce liquidity and raise volatility. Thus, I often go summer bargain-hunting for cheap FTSE 100 shares. And this summer is no exception, as I see share prices drifting down for no obvious reason.
The FTSE 100’s summer lull
Since 1 June, the FTSE 100 has gained just 53 points (+0.7%) to hit 7,133.68 points as I write. However, while some Footsie stocks have done well over the summer, others have underperformed. For the record, of 101 FTSE 100 stocks (one is dual-listed), 58 have risen in value over three months. Gains across these 58 winners range from just over 0% to 32.7%. The average gain across all 58 winners is 10.1%. This leaves 43 stocks that have fallen in value over three months. Declines among these 43 losers range from 0.7% to 19.6%. The average loss across these 43 fallers is 7.4%.
The Footsie’s biggest fallers
Among the FTSE 100’s 43 summer sliders are 13 stocks that have fallen in value by over 10%. Here are these ‘unlucky 13’ shares:
| Company | Sector |
Fall (%)
|
| Evraz | Mining/steelmaking | -10.4% |
| Lloyds Banking Group | Banking | -11.4% |
| HSBC Holdings | Banking | -12.2% |
| Rio Tinto | Mining | -12.5% |
| Burberry Group | Luxury goods | -12.5% |
| Reckitt Group | Household products | -12.8% |
| Weir Group | Engineering | -13.1% |
| M&G | Financial services | -14.3% |
| Associated British Foods | Food processing and retailing | -14.5% |
| Phoenix Group Holdings | Financial services | -14.5% |
| Polymetal International | Mining | -14.9% |
| Royal Mail | Postal services | -17.0% |
| International Consolidated Airlines Group | Airlines | -19.6% |
These 13 losers’ share prices have declined by between 10.4% and 19.6%. Thus, each has significantly underperformed the wider FTSE 100 over three months, but why? The three mining stocks (Evraz, Rio Tinto and Polymetal International) have been hit by slowing growth in China leading to lower metals prices. Other stocks (such as Burberry Group, Reckitt, and Associated British Foods) have slipped back as UK consumer spending eases.
I’d buy two of these Footsie fallers today
If I had to add one of these FTSE 100 fallers to my family portfolio today, I’d choose a stock that I consider to be a deep-value share. My pick of these losers is a perennial favourite of value investors: Lloyds Banking Group (LSE: LLOY). As Britain’s largest retail bank, Lloyds is heavily exposed to the UK economy. Thus, when worries resurface about Covid-19 variants causing consumer spending to slow, Lloyds shares can take a beating. At its 52-week low, this FTSE 100 stock hit 23.59p on 22 September 2020. Lloyds’ share price then soared as high as
One measure of the bank’s financial strength — its common equity tier 1 (CET1) capital ratio — has increased to 16.1% at mid-2021, versus 15.5% at end-2020. This is well in excess of the regulatory minimum, suggesting that Lloyds has billions of pounds of spare capital waiting to be released.
I don’t own Lloyds shares, but I’d happily buy them at the current price of 44.03p. However, if the UK economy were to be hit by more Covid-19-induced slowdowns, then I’d think twice about holding banking stocks!