BG stock has lost more than 15% of value from the high it recorded in early September. Of course, BT stock is less cyclical than BG: it is down 7% from the three-month high it registered on 19 September and isnt too far away from the lows for the year. Finally, ARM stock has been battered and is down 15% from the six-month high it recorded in early September.
BGs restructuring is taking longer than expected, which is bad news for shareholders. The macroeconomic landscape isnt providing a helping hand, either. A lack of leadership also weighs on the equity valuation of this British gas producer, but the shares are trading around the lows for the year and recent weakness may offer an opportunity to investors who believe that the market is oversold. BG needs divestment to become a leaner entity, and management should be quick to address the companys corporate structure. This is certainly one of the riskiest bet in the market at this point in time, but BG could reward brave investors.
BT Needs Growth
BT lacks growth, but it has become a more efficient business over time and that isnt priced into its shares. If the high-end of consensus estimates is met, BT stock will rise by 70% by the end of 2015, the bulls argue. That may be a stretch, particularly if BT doesnt show investors that it can grow at a faster pace. A six-month price target in the region of 43op is a base-case scenario for analysts. So, do the benefits of holding BT outweigh the risks?
In my view, BTs equity valuation should benefit from Vodafones woes, which are likely to persist for a very long time. I would hold BT stock as part of a diversified portfolio.A worse-case scenario entails a 35% drop in BT stock from its current level, according to bearish estimates from analysts.
ARM stock was one of the worst performers on Monday. A sales warning issued by chipmaker Microchip Technology from the USdidnt help thesector. The bears argue that ARM stock is expensive based on trading multiples, but at this price ARM stock remains attractive, in my opinion. The recent plunge in ARM stock may be based on the view that ARM management will have to lower the sales guidance, but I believe that management may surprise the market just as they did in previous quarters. A 10 value per share, for an implied 12% upside, is not overly optimistic.
The shares of these three companies will struggle if market volatility persists, so you may want to avoid them. Are you looking for a safer investment? It’s not easy to single out one company that could outperform the market in this environment. Still, you should keep a close eye on a businesswhose shares are in positive territory for the year but have been under pressure in recent weeks of trading.In fact, this British consumer behemoth could bethe ideal choice for your long-term portfolio! You should getthis reportright now — it’s completelyfree and withoutfurtherobligation!
Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.