Over the last six months high-flying FTSE 100 companies have been under pressure. Ashtead Group (LSE: AHT), Standard Chartered (LSE: STAN) and RSA Insurance Group (LSE: RSA) are down 12%, 32% and 8%, respectively. Will these stocks continue to slip downwards or is there scope for a bounce-back to previous highs?
US construction sector play
Ashtead Group is a highly cyclical equipment rental company based in the US. Basically Ashtead is a leveraged play on the US housing and construction sectors. In the last six years the company has performed incredibly. Profits have flown from £2m in 2010 to a whopping £303m in 2015 and the share price has responded by rising over 850% in the same timeframe.
However, in the last year the shares have fallen 28% from the all-time high with the recent pressure on the US economy. Analysts see the construction sector in the US slowing, which has a knock-on effect on Ashtead’s equipment rental business. Any pick-up in the sector could see Ashtead re-test highs.
Asian financials
The emerging markets specialist Standard Chartered is viewed as one of the weakest UK-listed banks and the share price has reflected this. The share price is now well below the lows seen in 2008/09, currently trading at levels last seen in 1995. 2015 was a terrible year for the bank with a huge loss posted, as well as revenues declining 16%.
The emerging market issues have hurt the bank and huge impairments have been taken in many of its operating regions. The bank does offer some value sub-500p, but most analysts believe that 2016 may well be worse than 2015 for emerging markets. The Chinese slowdown is also likely to hit the bank hard and reduce the share price further.
Troubled insurer
RSA Insurance Group is delivering good news to shareholders as the turnaround strategy continues to work well. After a very troubled year or two, the company is making money and its shares have been in demand this year. Even as a FTSE 100 company it’s set to post huge earnings gains this year of over 40% and the PE ratio is due to drop to a low 12.6 in 2017. This illustrates the scope for a nice share price rise in the next year or two.
Dividend hunters are also beginning to buy the share, although the dividend yield is only 2.5%, as there’s considerable scope for dividend rises. It could become a solid dividend stock in a few years and income investors are attempting to get ahead of the herd. The stock offers good value and should be a top performer in the FTSE in the next few years.
These three stocks all have issues to overcome but can be expected to post huge rises if all goes to plan. Turnaround stocks can offer the biggest returns and all three companies could post huge share price gains soon.
