The HSBC share price and this bargain FTSE 250 dividend stock could skyrocket

Harvey Jones reckons that HSBC Holdings plc (LON: HSBA) and this stellar FTSE 250 (INDEXFTSE: MCX) dividend stock are buying opportunities waiting to be snapped up.

| 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.

Today’s stock-market volatility spells bad news for financial services companies, especially those with large asset management arms. Assets under management inevitably plunge when markets slump, while investor inflows turn into outflows. These two financials have endured a rough few months, but days like these make excellent buying opportunities for long-term investors.

China crisis

Asia-focused banking behemoth HSBC Holdings (LSE: HSBA) is down 15% in the last three months, due to the global sell-off, concerns about slowing growth in China and Trump’s threatened trade war. The bank also disappointed shareholders, who were upset by the fact that 2017 adjusted pre-tax profits rose just $2.1bn to $21bn. First world investor problems, eh? Many also took umbrage at the fact that HSBC said little about returning cash to shareholders.

HSBC looks like a bargain to me right now, trading as a forecast 13.3 times earnings, with an anticipated yield of 5.6%. Its price-to-book value is precisely 1, so all the risks seem effectively priced-in. Earnings per share (EPS) are forecast to grow 56% this year and 5% in 2019.

Bargain bank

The big worry is the global economy in general, and China in particular, where growth is slowing markedly as the authorities rein-in credit excesses. Like Jupiter, HSBC also faces a challenging year – so what’s new? Chief executive Stuart Gulliver stepping down after seven years adds to the uncertainty.

Higher interest rates may work in HSBC’s favour, finally allowing it to widen net interest margins. This may be the best bank around and further stock market volatility could throw up an even better buying opportunity, but I reckon you have a pretty good one today.

Knocked out of orbit

Jupiter Fund Management (LSE: JUP) is trading 4.95% lower today following its disappointing trading update for the three months to 31 March. The “highlights” read more like lowlights: quarterly net outflows totalling £1.3bn, assets under management decreasing 6.6% to £46.9bn since 31 December.

Chief executive Maarten Slendebroek admitted a challenging start to 2018, blaming “a period of market turbulence together with subdued demand.” Rising outflows did not come as a surprise, as he warned that Jupiter is now sourcing more asset growth from its international distribution partners, which will make its flow profile less predictable in the short term.

Dark star

Jupiter is looking to drive growth with further diversification by product, client type and geographic reach, but even the best laid strategy can come unstuck when markets are selling off. Fund management is a risky sector to move into right now, with the nine-year bull market run exceedingly long in the tooth. The global economy is still growing, but many analysts I speak to now predict a recession in 2019. That said, some have been predicting a recession for years.

Jupiter is a tempting buy-and-hold with a projected yield of 6.6%, although cover is relatively thin at 1.1. Forecast EPS growth is a solid 4% in the 2018 calendar year, then 6% in 2019 (although stock market volatility may have something to say about that). Trading at a forecast bargain price of 13.1 times earnings, today’s disappointment looks like a buying opportunity. You may get an even better one if market volatility persists.

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 of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Up 105% in a year! Is this rocketing FTSE bank the perfect pick for my Stocks and Shares ISA?

Harvey Jones is drawing up a shortlist of stocks to purchase inside his Stocks and Shares ISA allowance. This FTSE…

Read more »

Investing Articles

Is it madness to buy Palantir shares after Q3 earnings?

Palantir stock's surging again after the firm's Q3 earnings report. But after a 150% gain, is it too late to…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

£6,000 in savings? Here’s how I’d aim to turn that into £1,032 a month of passive income!

A small investment in high-dividend-paying stocks with the returns used to buy more shares can generate big passive income over…

Read more »

Chalkboard representation of risk versus reward on a pair of scales
Investing Articles

As Lloyds’ share price tumbles 14%, is this an unmissable opportunity for me to buy at a bargain-basement price?

The Lloyds share price is substantially below its year high, but decent earnings prospects should drive its price and dividend…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

2 UK shares that could rise if Trump wins the Presidential election

These UK shares are among the FTSE 100's most popular stocks. And they could rise in value if Donald Trump…

Read more »

Closeup ruffled American flag representing US stocks and shares
Investing Articles

2 UK stocks that could rise if Harris wins the Presidential election

Royston Wild believes these UK stocks could receive a bump if Kalama Harris wins the Presidency, giving their share prices…

Read more »

Investing Articles

After a 96% plunge, is buying more Aston Martin shares throwing good money after bad?

Just two weeks after buying Aston Martin shares Harvey Jones found himself nursing a painful loss. Yet after recent news…

Read more »

Investing Articles

After crashing 45% in October, should I buy this FTSE 250 share for my Stocks and Shares ISA?

Roland Head explains why he’s tempted to add this risky FTSE 250 turnaround share to his Stocks and Shares ISA…

Read more »