Can AstraZeneca plc, Old Mutual Group plc And Standard Life Plc Turn Their Sickly Performance Around?

AstraZeneca plc, Old Mutual Group plc and Standard Life Plc may all have a healthier future ahead of them, says Harvey Jones.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

These three stocks have struggled lately but that could make today an exciting entry point for long-term investors, especially those who relish dividends.

AstraZeneca

Pharmaceutical stocks are often seen as the old reliables of investing, but AstraZeneca (LSE: AZN) involves taking a bit of a punt. The gamble is this: you’re banking on chief executive Pascal Soriot’s strategy of replenishing the company’s pipeline of drugs faster than it can be drained by patent expiries and generic competition.

The impact of patent expiries is real and immediate: sales of its big selling heart drug Crestor are already declining in advance of its US patent expiry next month. The pipeline, by contrast, has yet to start flowing. Soriot reckons that new blockbuster treatments can deliver revenues of $45bn by 2023, up from $26bn last year, but that’s seven long years away. AstraZeneca is (quite rightly) pumping money into R&D, with core costs rising 21% in the last year, and all investors can do is hope it pays off, or risk losing their shirt. Are you content with a 4.52% yield while waiting to see if Soriot’s high stakes flutter plays out?

Old Mutual Group

This is a troubled time for life companies as global stock market volatility unnerves investors, and Old Mutual Group (LSE: OML) can hardly have expected to escape unscathed, especially given its focus on emerging markets. Its share price is down 20% over the past year but it has revived lately in line with broader investor confidence, to rise 25% in three months.

To complicate matters, the board announced a major restructuring programme in March, which will separate the group’s four constituent businesses. This could be bad news for dividend investors. Payouts may be limited as the company looks to retain more capital to cushion the separation process, which should be completed towards the end of 2018. Group chief executive Bruce Hemphill says this should make it easier for each component to raise finance from capital markets, manage regulatory demands and release shareholder value. Once again, investors will have to be patient. Trading at 10 times earnings and yielding 4.53%, the price looks right for a company that reported pre-tax operating profit growth of 11% to £1.7bn in 2015.

Standard Life

Fellow insurer Standard Life (LSE: SL) has also had a rough 12 months, falling 27% in that time, but in contrast to Old Mutual there has been no bounce back lately, as its share price continues to fall. Yet it may also feel unfairly treated by stock markets, with 2015 results showing a solid 4% rise in assets under administration to £307.4bn despite volatile markets, driven by net inflows of £6.3bn.

It was able to reward loyal investors with total dividends of 18.36p, up 7.8% for the year, and today it yields a handsome 5.38%. Its valuation looks pricey today at 25 times earnings, but is forecast to fall to just 12.6 times by year end, due to anticipated earnings per share growth of 99% this year. Don’t be confused by its name: Standard Life is less of an insurer, more of an asset manager these days. HSBC has set a buy price of 490p which would suggest almost 45% upside from today’s 341p. Only a stock market crash can stop it now….

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

10% dividend growth! 2 FTSE 100 stocks tipped to supercharge cash payouts

These FTSE 100 stocks have strong records of dividend growth. And they're expected to keep on delivering, as Royston Wild…

Read more »

Investing Articles

Down 17% in a month and yielding 7.39%! Is this FTSE 100 share a screaming buy for me?

When Harvey Jones bought Taylor Wimpey last year he thought this FTSE 100 share was a brilliant long-term buy-and-hold. Has…

Read more »

Investing Articles

Here’s how I’m using a £20k ISA to target £11k+ in income 30 years from now

Is it realistic to put £20k in an ISA now and earn over half that amount every year in passive…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

If I could only keep 5 UK stocks from my portfolio I’d save these

Harvey Jones is running through his portfolio of top UK stocks to see which ones he couldn't bear to do…

Read more »

Midnight is celebrated along the River Thames in London with a spectacular and colourful firework display.
Investing Articles

I’m aiming for a million buying unexciting shares!

By investing regularly in long-established, proven and even rather dull businesses, this writer plans to aim for a million. Here's…

Read more »

Investing Articles

3 things to consider before you start investing

Our writer draws on his stock market experience to consider a few vital lessons he would use to start investing…

Read more »

Investing Articles

Will this lesser-known £28bn growth stock be joining the FTSE 100 soon?

As the powers that be plan a reorganisation of Footsie listing rules, this massive under-the-radar growth stock could find its…

Read more »

Investing Articles

Fools wouldn’t touch these 5 FTSE 350 flops with a bargepole – how come I own 3 of them?

Harvey Jones took a chance on three struggling FTSE 350 stocks in the hope that they'd stage a dramatic recovery.…

Read more »