After a gut-wrenching few days of what seemed like the FTSE 100 preparing itself to test new lows, investors were treated to an up day yesterday with the blue-chip index climbing by 0.9%. That’s not to be sniffed at in the current market climate.
However, if you start to look beyond the headline numbers of the indexes, particularly now that reporting season is in full swing, you’ll see there are many moving parts driving the indexes throughout the course of the day.
Below I focus on three of the more interesting market movers: Chip designer ARM Holdings (LSE: ARM), Homewares retailer Dunelm (LSE: DNLM), and high-performance polymer solutions producer Victrex (LSE: VCT).
As can be seen from the chart below, all of the companies have witnessed share price movements in excess of the main index – the key is to understand what caused the movements and how to react. Let’s take a closer look…
ARM: Off by 4.4%, trading ‘broadly in line’
There are plenty of companies that would give their right arm for earnings and dividend growth of 25%, and £951m in cash on the balance sheet. So why did the shares fall?
Perhaps it was the rather racy 27 times forecast earnings that caused the decline, or the belief that the future of the company is tied to that of Apple, which has seen its own shares sell-off of late.
However, I believe it was the outlook that spooked investors with management flagging increased economic uncertainty. This may influence consumer and enterprise spending, potentially impacting semiconductor revenues and industry confidence. Based on current conditions in the semiconductor market, management expected revenue for 2016 to be broadly in line with (director speak for slightly below) market expectations.
Dunelm: Shares 13% up with further return of cash
Along with other retailers, Dunelm had suffered due to the now-very-familiar unseasonably warm weather, which management had flagged in January. This had sent the shares in a downward trajectory with them reaching one-year lows, not helped by market sentiment during 2016.
However, the shares rallied Wednesday as investors warmed to the interim results, which pointed positively to the second half, coupled with a 9% increase in the interim distribution and a separate special distribution of 31.5p per share.
Commenting on the results, new CEO John Browett seemed positive too saying: “After a solid performance in the first half, we had a strong sale after Christmas and we expect further good progress in the remainder of the year.”
Victrex: Up 2.5%, investors breathe sigh of relief
Last up is one of the most impressive UK growth stories you’ve never heard of. Victrex specialises in the production of a highly versatile form of plastic known as polyetheretherketone, or PEEK for short.
As can be seen from the chart, the shares have sold-off recently due to exposure to the oil and gas sector, plus global growth worries.
Yet it appears that things weren’t quite as bad as investors expected and the shares were marked-up by 2.5% Wednesday as management pointed to an expected stronger second half.
And with the shares in this quality company currently trading on around 13 times forecast earnings and yielding over 4% according to data from Stockopedia, now may be a good time to take a closer look.
