Today I am looking at the investment prospects of three battered big-caps.
Burberry Group
Luxury good vendor Burberry (LSE: BRBY) has been one of the major casualties of the FTSE washout of recent months, the stock having conceded 13% since the middle of April alone. This does not come as a huge surprise given that updates during this period have confirmed the sustained sales weakness affecting key Asian markets — just this week the firm announced “the continued challenging environment in Hong Kong” prompted a double-digit-percentage sales decline there during April-June.
The political strife in the key Hong Kong territory is of course a concern, but in the long-term I believe Burberry’s position at fashion’s top table should underpin stunning sales growth across the world, particularly as spending power in developing regions powers higher. Indeed, the bag and coat manufacturer’s latest release showed total underlying revenues leap 8% in the quarter to £407m, with sales in Europe, Middle East, India & Africa (EMEIA) still heading through the roof.
The City expects Burberry to see earnings edge 2% higher for the year concluding March 2016, before recovering sales strength drives the bottom line 11% higher the following year. These projections leave the firm dealing on P/E multiples of 19.9 times and 18.1 times for these years, respectable readings given the terrific brand power of its products and improving digital and global presence.
Randgold Resources
Precious metals play Randgold Resources (LSE: RRS) has also seen its share price duck markedly lower in recent times, and the digger is now dealing 19% lower from levels printed just three months ago. This is no great surprise as the gold price has trekked steadily lower during this period due in large part to a rising US dollar — indeed, a recent bullion price of $1,140 per ounce is hovering just above multi-year lows.
The hard currency has traditionally been a safe-haven during times of macroeconomic and geopolitical turbulence, but this has failed to materialise more recently as expectations of Fed rate hikes — combined with fears over slowing physical demand in Asia — has added to the pressure created by dollar strength. With gold prices languishing, Randgold Resources is expected to suffer a 1% earnings fall in 2015.
Although the firm’s low-cost operations make the miner a superior pick to many of its sector peers, I believe forecasts of a 26% bottom line recovery in 2016 are far wide of the mark. And the stock can hardly be described as cheap, either, with P/E ratios of 25.3 times for this year and 20.1 times for this year and next failing to factor in the risks facing the gold industry.
Aberdeen Asset Management
Conversely, I believe that Aberdeen Asset Management (LSE: ADN) is a stellar selection for bargain hunters thanks to its 17% share-price slump during the past three months. With fears over emerging market growth having moderated more recently — indeed, the company advised in June that “new business inflows have continued to grow” — I expect revenues to stomp steadily higher once more.
Thanks to rejuvenated client activity, the City expects Aberdeen Asset Management to flip from the rare 5% earnings dip posted in the year ending September 2014 to a 2% rise in the current 12-month period, leaving the business changing hands on a super-attractive P/E multiple of 12.3 times — any reading below 15 times is widely considered terrific value. And expectations of an extra 6% rise in 2016 pushes the ratio to an even-better 11.7 times.
On top of this, Aberdeen Asset Management is also anticipated to continue throwing up market-bashing dividend yields — a projected payment of 19.8p per share for this year creates a generous reading of 4.9%. And predictions of a 21.8p reward in 2016 drives the yield to a mouth-watering 5.4%.
