It can be surprising to see extreme volatility in FTSE 100 shares, but theres been plenty over the past year with a number of companies suffering significant falls.
Look at fashion darling Burberry (LSE: BRBY), for example. Pretty young things in emerging markets like China couldnt get enough of the fancy rags, and the share price had been storming ahead in the five years to the middle of February, the price almost trebled. But since then, weve seen a 33% slump to todays 1,280p.
Interim results released on 12 November didnt help, with the company talking of a robust performance in a challenging environment for luxury. Pre-tax profit did rise, by 9% to 155m and the firm upped its interim dividend by 5%, but theres a small fall in EPS forecast for the full year after years of slowing growth.
Even after the fall, the shares are still on a P/E of over 17, which implies confidence about the future. Burberry is a solid company and will surely do fine, but its fashion and will the free-spending in China still want the same designer labels when their disposable income picks up again?
Not so safe
Even so-called safe stocks like Centrica (LSE: CNA) have been hit, with a 28% fall from 2015s high point to 214p and from their peak in September 2013, were looking at a 48% fall in value. Its the oil price slump thats behind Centricas earnings fall, of course, as its upstream business proves a drag on its downstream energy supply EPS fell 28% in 2014 and theres a further 8% fall forecast for this year.
The big question is whether the dividend, currently predicted to yield 5.8% this year, can be maintained. Sustained low oil prices would make that increasingly difficult, but there will inevitably be a recovery in prices sooner or later, and I reckon the dividend looks fairly safe and Centrica shares should be in for a decent rise if and when oil pushes back above the $60 level.
Banking slump
The wheels have come off the share price recovery at Royal Bank of Scotland (LSE: RBS) a little, and since late February theres been a 24% fall to 311p. Its been a tough year for banks in general, but I think the fall at RBS has been partly due to a correction that has been waiting to happen compared to fellow bailed-out bank Lloyds Banking Group, RBSs valuation has been looking a bit too high to me for much of the past couple of years.
RBS will be back to health one day and all of todays troubles and restructuring costs will be behind it, but the shares are on a forward P/E based on 2016 forecasts of around 13.5 and thats with no return to paying dividends yet, and a yield of only 0.4% tentatively penciled in for 2016. Until RBS resumes handing out the annual cash, all I can see the share price doing is stragnating.
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Alan Oscroft owns shares in Lloyds Banking Group. The Motley Fool UK has recommended Burberry and Centrica. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.