Two FTSE 100 stocks suffered a real pummelling in February, but as a contrarian investor I’m wondering whether this makes them the best shares to buy in March.
While the index ended the month roughly where it began, the St James’s Place (LSE STP) share price crashed 20.9% while Airtel Africa (LSE: AAF) shares dropped 12.32%.
Happily, I don’t hold either of them, but should I take advantage of their sudden cheapness to build a long-term position?
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Ups and downs
I wasn’t surprised to see St James’s Place come unstuck. As a financial journalist, I always felt the financial advisory group was cleaving to an outmoded charging model and so it has proved.
Last year, it fell foul of the Financial Conduct Authority’s new Consumer Duty rules, designed to crack down on charges that did not offer ‘fair value’ and ‘good outcomes’ for customers. It was forced to revamp its fee structure to reduce ongoing charges and scrap exit fees.
Full-year 2023 results published on 28 February revealed an IFRS loss after tax of £9.9m, down from a £407.2m profit in 2022. The full-year dividend plunged 52.78p per share to 23.83p. The stock crashed 18% on the news. It’s down 60% over 12 months.
New CEO Mark FitzPatrick hopes to park these problems and move on, and broker Citi recently upgraded the stock to ‘buy’, claiming the bad news is priced in. I like buying good companies on bad news. However, I don’t buy companies I personally consider to be ‘bad’ on bad news. Given what I do for a living, I won’t be touching this one.
Airtel Africa is a rarity for me. I’ve never written about it for the Fool, or considered buying its shares. There’s a first time for everything.
The Africa-focused telecoms group only floated in 2019, its shares opening at less than 70p and rocketing towards 170p within three years.
Inconstant revenues
They took a beating last month despite reporting a 21% increase in Q3 constant currency revenues and announcing a $100m share buyback. The issue wasn’t with Airtel but the devaluation of the Nigerian naira, which turned that revenue increase into a drop of 8% on a reported basis.
Currency problems aside, Airtel looks well set, with total customer numbers up 9.1% to 151.2m, helped by continued penetration of its mobile data and money services.
CEO Olusegun Ogunsanya has faith in the group’s “strong long-term growth outlook”, and reckons repurchasing its own shares is an attractive use of its capital today. So are its shares a wise use of my own money?
Airtel Africa has massive growth potential across 14 populous and growing African countries. It looks cheap at just 6.95 times earnings. The 4.46% yield is attractive, too. The potential risks are higher too, and not just currency-related ones. Forecast net debt is £3.7bn in 2024, which is slightly higher than today’s market cap of £3.64bn.
The stock is now on my radar. It’s too early for me to buy it today, but I’m going to keep close tabs on it. I wouldn’t list either company among the best shares to buy today. Airtel Africa will be interesting to watch, though.
