These 3 FTSE 100 stocks have crashed up to 44%. I’d buy them today

G A Chester suggests investors should be ‘greedy when others are fearful’ with these three big FTSE 100 fallers.

| 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.

Many investors nod in agreement with Warren Buffett’s simple and sage advice, such as “be greedy when others are fearful.” Except when it comes to putting those words into practice!

The stumbling block I hear most is: “I like the company, and its share price has fallen a long way, but I think it could fall further.” This isn’t being greedy when others are fearful. It’s the very definition of being fearful!

If you’re confident a company is well-managed, financially strong, and has good long-term growth prospects, if you were thinking of buying it’s shares a week ago, a few weeks ago, or a few months ago, and if those shares are now trading at a material discount, it’s time to be greedy.

Fear in action

Companies in the tourism and travel industries have been hardest hit by fears about the impact of the coronavirus. I’m not surprised by this. We’ve had headline news about cruise ships and hotels in lockdown, and restrictions on travel.

However, I believe cruise giant Carnival (LSE: CCL), flights and holidays firm EasyJet (LSE: EZJ), and InterContinental Hotels Group (LSE: IHG) are well-managed and financially-strong businesses, with good long-term growth prospects.

I’ve rated two of these three FTSE 100 companies ‘buys’ — and, in the case of IHG, a ‘hold’ — in the recent past. With their share prices closing yesterday at large discounts to a week ago and their 52-week highs, I think this is a great opportunity for buyers.

InterContinental Hotels’ share price is down 12% this week, and 23% from its 52-week high. For EasyJet, it’s 26% and 28%. And for Carnival, it’s 20% and 44%. If you’re not going to snap up such stocks at such discounts, when are you going to buy? When everyone’s being greedy and prices are high?

Long-term view

Undoubtedly, CCL, EZJ and IHG face challenges in the near term. It would be no surprise to see their earnings forecasts for 2020 downgraded by City analysts, if the impact of the coronavirus proves more severe than currently envisaged.

I think it’s a fool’s errand to value the businesses on present forecasts. Or to try and second guess where the forecasts might move in the coming months.

I reckon it’s far better for long-term investors to look at the earnings these enterprises have generated over the last few years. And to ask whether — when the impact of the coronavirus recedes — the world’s biggest cruise operator, one of the owners of some of the world’s most well-loved hotel brands, and one of the most popular and forward-thinking budget airlines are capable of growing their earnings over the long term. Personally, I think they are.

At a share price of 2,397p, Carnival trades at 7.1 times recent average annual earnings. InterContinental Hotels, at 4,422p, trades at 19.3 times earnings. And EasyJet, at 1,110p, at 10.7 times. The multiples are spread over quite a range, but are well below the valuations the market has afforded each company in more benign times. As such, I see good value in all three stocks.

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.

The Motley Fool UK has recommended Carnival and InterContinental Hotels Group. 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

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

If I’d invested £5,000 in a Nasdaq index fund 5 years ago, here’s how much I’d have now

The Nasdaq index keeps hitting new all-time records in 2024, as US tech stocks fly. How much could I have…

Read more »

A senior group of friends enjoying rowing on the River Derwent
Investing Articles

£500 to invest a month? Consider aiming to turn that into a £20,000 passive income like this!

With a regular monthly investment, it's possible to build a large and steady passive income for retirement. Royston Wild explains.

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Investing Articles

As retirement needs soar 60%, here’s how I’m building wealth with UK shares

A regular investment in UK shares and funds could help Brits create a large and lasting pension. Our writer Royston…

Read more »

Investing Articles

I’d buy Games Workshop shares before they reach the FTSE 100!

Games Workshop shares look likely to join the FTSE 100 soon. Here’s why I think investors should consider buying the…

Read more »

Businesswoman calculating finances in an office
Investing Articles

Could me buying this stock with a $2.5bn market-cap be like investing in Tesla in 2010?

Archer Aviation (NASDAQ:ACHR) stock's nearly doubled so far in November. Could this start-up be another Tesla in the making?

Read more »

Investing Articles

5,000 shares of this UK dividend stock could net me £1,700 a month in passive income

Our writer calculates the passive income he could earn from holding a significant number of shares in this powerful dividend-paying…

Read more »

Investing Articles

9.3%+ yields! 3 FTSE 100 dividend giants to consider buying

Our writer examines a trio of high-yield FTSE 100 shares and explains some of the opportunities and risks he sees…

Read more »

Investing Articles

As the Kingfisher share price drops on Budget fallout, should I buy?

The Kingfisher share price was on a strong 2024 run until the DIY group warned us of the possible effects…

Read more »