Financial markets are ticking upwards this morning as US fiscal stimulus measures boost global equities. The FTSE 100 and FTSE 250 are both enjoying a boost after a tough week. But would I buy some of its battered shares or those that are back in favour?
FTSE 100 income investment
FTSE 100 stock Standard Life Aberdeen (LSE:SLA) has taken a battering in recent months. The investment management company has seen its share price fall 10% in the past week after announcing the disposal of 40m shares in HDFC Life, its Indian joint venture partner. Investors had welcomed the sale as it was to bring liquidity to the troubled company, but it went through at a price of £30m below expectations. Thankfully, Standard Life’s one redeeming feature is its 8.5% dividend yield, which has so far survived the pandemic. Standard Life shares are trading with a price-to-earnings ratio of 28, which is very high considering the economic situation. This leads me to expect further volatility ahead. However, I think it is a stock that will endure and with such a generous dividend, it could be hard to pass up for a long-term income investor’s portfolio.
High-risk stocks
FTSE 250 constituent and commercial property company Hammerson has seen its share price rise a staggering 157% in the past month. The company owns various shopping centres and as the UK retail sector begins to reopen, hopes are being pinned on a recovery. But Hammerson shares are still down 60% in a year and it is likely to have many struggles ahead. I would avoid this stock.
FTSE All-Share member Premier Oil is a highly volatile oil stock loved by day-traders. It is saddled with a lot of debt, but until coronavirus hit, it was winning contracts and on the way to financial freedom. It still has the potential to make a comeback, but a suppressed oil price will make this difficult. The PMO share price is up almost 6% this morning, up 55% in a month, but down 40% in a year. I think it is a risky buy, but one to watch.
Pandemic fallout
Builders merchant Travis Perkins (LSE:TPK) made the depressing announcement yesterday that it will be closing 165 stores and dropping 9% of its workforce, with nearly 2,500 job losses. Yet another retailer hard hit by the pandemic, the Travis Perkins share price fell on the news, but has rebounded nearly 6% this morning. Although it expects the coming recession to last a couple of years, it does see a glimmer of hope that the construction industry is resuming. The FTSE 250 constituent also owns Toolstation and Wickes. The company told the London Stock Exchange that most store closures will affect the Travis Perkins General Merchant operation, where profit margins are slim and safe distancing practices are difficult to implement.
From a personal viewpoint, my neighbourhood Travis Perkins has been operating a limited service in recent weeks, while other builders merchants in the area have been doing a roaring trade. I get the impression many of those customers will not remain loyal to TP. Product price and availability are ultimately what keep these businesses going. Travis Perkins will need to be competitive on either or both to survive and thrive. It is not a share I will be buying.
