With the festive period drawing to a close, it’s time to start thinking about what could happen to the share prices of several blue-chip companies in January.
Here are three FTSE 100 stocks I’ll be watching closely.
Next
Clothing, beauty and homewares retailer Next (LSE: NXT) will be one of the first companies to report when markets reopen, providing a trading statement on 5 January.
Like most consumer-facing stocks, evidence of a stellar pre-Christmas shopping period is vital. Whether that’s been the case or not given the cost-of-living crisis is hard to say. Next certainly isn’t the cheapest retailer on the high street.
Then again, one could say that a lot of negativity is already priced in. After all, the shares can be picked up for 10 times forecast earnings as I type. That looks pretty reasonable for a quality business that stuck to its full-year guidance in November. The recent acquisitions of Made.com and Joules were also positive, in my view.
So, as murky as the short-term outlook is, I’d consider buying Next prior to the update if I wasn’t already exposed to the sector.
Tesco
Supermarket titan Tesco (LSE: TSCO) is down to report exactly a week later (12 January). Will there be some New Year cheer for investors?
Well, Tesco clearly benefits from operating in a defensive sector. Everyone needs to eat, regardless of inflation. Moreover, the business also continues to boast a market share almost double that of its nearest competitor.
Then again, one might rightly claim that this hasn’t stopped the share price from falling hard in 2022. And if Christmas sales figures disappoint the market — perhaps as a result of German budget chains luring customers away — there could be more pain to come.
Yet with it trading at a P/E only slightly higher than Next, I continue to rate this share and would consider making it a cornerstone of an income-focused portfolio if that were my only goal. Since I’m more inclined to buy growth stocks at the moment, however, I won’t be investing.
Persimmon
Reporting on the same day as Tesco, a final FTSE 100 stock I’ll be watching in early January is housebuilder Persimmon (LSE: PSN).
No doubt about it — 2022 has been brutal. Rapidly rising interest rates combined with the aforementioned tightening of belts has played merry hell with the previously buoyant property market. Surging post-Grenfell cladding costs haven’t helped either.
The only positive I can muster is that Persimmon isn’t alone in seeing its share price tumble.
We may not have seen the bottom yet. Mortgage lender Halifax has estimated house prices will fall by roughly 8% next year. So, I’d also be staggered if the company didn’t mention slowing sales and higher booking cancellations in January given that it already warned on profit margins back in November. We know the dividend is going to be cut too.
On a more positive note, the stock now looks potentially cheap. The shares change hands at a P/E of 8 for 2023, even after taking into account a predicted 40% drop in earnings growth. Signs that inflation has peaked could be the catalyst to get the price moving up again.
Even so, I’d opt to build a position slowly if I had the cash available.
