Having said this, not every company’s share price will necessarily suffer as a result of the coronavirus outbreak or other global fears. Here are three that could prove resilient. 

“Trending substantially ahead”

Companies operating in the spread betting/Contracts for Difference space are worth watching. Today, one of the three listed on the London market — Plus 500 (LSE: PLUS) — issued a positive update. Yes, you read that right.

As a result of the fear that’s spread throughout the investing world over the last few days, the FTSE 250 constituent stated that it had seen “a significant increase in levels of customer trading activity” before going on to say that its financial performance over Q1 is“trending substantially ahead” of the same period last year. You’re not seeing language like that from many companies at the moment!

Of course, no one knows if this momentum will last. That said, Plus’s shares were trading on what appeared to be a very cheap forecast price-to-earnings (P/E) ratio of a little under 9 before markets opened this morning and yielding 5.8%. It’s next scheduled to report to the market in April. 

Downturn play

With Bank of England Governor Mark Carney warning that disruption to supply chains could mean a hit to UK growth prospects, it’s understandable if many businesses are getting nervous. Should a prolonged downturn come to pass, one company that may benefit is insolvency specialist Begbies Traynor (LSE: BEG).

Even if you’re confident that the coronavirus outbreak won’t bring the economy to its knees, there’s always the impact of troublesome Brexit negotiations to ponder. Back in January, the company released research showing that just under half a million UK businesses were already in ” significant distress” — a rise of 81% since the beginning of 2016 (the same year as the EU referendum).

Despite this, shares in Begbies certainly haven’t been immune to the recent sell-off and have now fallen back to prices not seen since last spring. This leaves them trading at 13 times earnings. A potential 2.8p dividend in the current financial year has the stock yielding 4.2%.

Stable demand

Call up a chart of its share price performance over the last week and you’ll see why funeral services provider Dignity (LSE: DTY) is the final pick of today’s shares that could protect your portfolio from the current crisis. Its price is currently up 4% since Monday, supposedly on the belief that demand for its what it does will remain stable, even during tough economic times. 

As always, there’s no sure thing when it comes to investing and Dignity could become another victim of the sell-off in time. That said, the fact that it was already trading on a little less than 9 times forecast earnings could mean it suffers less severe selling pressure than other, more highly-rated stocks. 

Regardless of what happens next, it’s worth being aware that the company has faced increased competition over the last few years. The shed-load of debt on the balance sheet is another potential red flag. Last year, the latter came in at almost twice the value of the whole company!

The post Fear this crash could get worse? Here are 3 stocks I think could hold their own! appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Reset

Dignity was at one time a mid-cap FTSE 250 company. After years of delivering handsome rewards for investors, its share price reached an all-time high of about 2,900p three years ago. Currently, the price is just 540p, up 2.4% on the back of today’s trading update.

What went wrong? In a nutshell, Dignity regularly increased its prices well above the rate of inflation. Ultimately, in the face of rising competition from cheaper and ‘no-frills’ operators, it had to rethink its business and reset its pricing.

Favourable backdrop

Today, the company said: “Funeral market share continued to show a positive response to the group’s updated service offering and price points introduced since January 2018.” The operating performance in the third quarter and year to date was in line with the board’s expectations.

It’s looking like the number of deaths in 2019 (potentially around 577,000) will be the lowest since 2014. However, despite some variance year to year, longer-term run-rate forecasts tend to be reasonably accurate.

On this score, the latest forecasts from the Office for National Statistics – 600,000 deaths in 2020, rising to 740,000 in 2040 – provide a favourable backdrop for Dignity to grow its business.

3 reasons I’d buy

City analysts are forecasting a return to earnings growth (+10%) next year, and the stock can currently be bought for just eight times those forecast earnings. Debt and an investigation into the funeral sector by the Competition and Markets Authority are areas of risk.

However, on balance, the low earnings multiple, the industry’s favourable long-term growth fundamentals, and Dignity’s likely resumption of dividends in due course, lead me to rate the stock a Buy.

Strategy for growth

Like Dignity, BT’s shares were trading a lot higher a few years ago (around 500p) than they are today (190p). Also like the funerals firm, City analysts are forecasting BT to return to earnings growth (+4%) in its next financial year. The stock is trading at a mere 7.7 times forecast earnings.

The company also has a running dividend yield of 8.1%. However, I wouldn’t be surprised to see the payout rebased lower after the current financial year. This is because new management is pursuing a strategy of investing for the long-term growth of the business. In a competitive market, it may require greater investment than currently envisaged. And with the group also having significant debt and pension obligations, a dividend cut may be necessary.

Despite this, and the recently announced loss of a wholesale contract with Virgin Media from the end of 2021, I believe BT’s management is pursuing the right strategy. While there may yet be further short-term pain, I reckon the current low valuation of the stock, the group’s scale, and ownership of both fixed-line and wireless networks, promises long-term gains for patient investors. For these reasons, I rate the stock a Buy at the current level.

The post Is it time to pile in to the BT share price? appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Here, I’m looking at whether fallen FTSE 250 angel Dignity could now be the turnaround buy of the year, and whether AIM-listed Tungsten could also be set to fly.

Below expectations

Dignity’s shares, which reached an all-time high of over 2,800p in autumn 2016, fell as much as 8% in early trading today, hitting a new multi-year low of 624p. This came after the company released a first-quarter update with underlying operating profit down 42% on 15% lower underlying revenue — an operating performance “below the Board’s expectations.”

However, this was primarily the result of a “significantly lower than expected number of deaths” during the period (12% to be precise). Below- or above-trend quarters can occur, but the company reminded us that historical data over the last 20 years indicates the final volume will likely be within 3% of the previous year.

Transformation

Faced with a trend of demand for lower-cost funerals, and a Competition and Markets Authority investigation into the industry, Dignity is in the midst of a transformation plan that includes a margin-sapping, if modestly market-share-gaining, re-pricing strategy.

Clearly with a margin reset, and future profits growth being at a more sustainable (lower) level than in the past (when boosted by regular hefty price rises), Dignity is a less valuable business than it one appeared. Nevertheless, I see this as an attractively defensive business with a credible turnaround strategy.

The shares have recovered some ground since this morning, and are trading at 640p, as I’m writing. I’m looking at 10 times earnings and a 3.8% dividend yield on my expectations for the current year. And I reckon earnings should begin their return to growth next year. As such, I think this former FTSE 250 stock could be a strong turnaround story from this level, and I rate it a ‘buy’.

Fundamental change

You’d have thought a firm whose clients include 74% of FTSE 100 companies and 71% of Fortune 500 companies — and which processed transactions worth over £164bn last year — would be able to turn a profit. Unfortunately, Tungsten never has. Multiple boardroom and strategy changes, since its flotation at 225p a share in 2013, have so far come to naught. The shares are trading at 39p as I’m writing.

The company, having “completely reconstituted our board,” during the last six months, is “undergoing a period of fundamental change in regard to strategy, operations, governance and culture.” A fortnight ago, it announced the initial results of an operating review, and a raft of new initiatives.

I’ve been rather scathing of Tungsten over the years. And given its history of failed promises of profits just round the corner, and analyst forecasts of continuing losses for the foreseeable future, I find it hard to get excited by the latest round of change. Maybe something will come of it this time, but it’s a stock I’m continuing to avoid for the time being.

The post Is this fallen FTSE 250 angel now the turnaround buy of the year? appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

I think that my first stock today qualifies on both scores. FTSE 100 consumer goods group Unilever (LSE: ULVR) is an impressive business by any standard. That’s not just my view — Warren Buffett tried and failed to buy this business in 2017.

Buffett’s failed bid attempt acted as a wake-up call for Unilever’s management. The firm has since adopted a more aggressive approach to growth, costs and shareholder returns. Although I have mixed feelings about some of these changes, the results so far have been impressive.

In 2018, the group’s underlying operating profit margin rose from 17.5% to 18.4%. Share buybacks helped to boost earnings and dividend growth was accelerated. In all, more than €10bn was returned to shareholders.

There’s more to come

The pricing power of Unilever’s brands is a key part of the company’s appeal to investors. Last year, the company only managed a 1% price increase compared to the prior year. That was a step back from 2017, when the firm bumped up prices by an average of 2.4%.

Luckily, the company seems to be returning to form under new chief executive Alan Jope. On Thursday Mr Jope said that prices rose by an average of 1.9% during the first quarter of the year, with volumes up 1.2%.

This growth was led by a strong performance in emerging markets, suggesting this important part of the firm’s expansion is still on track.

The right time to buy?

Another of Warren Buffett’s most famous quotes is that “it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”.

I’m confident Unilever is a wonderful company. But with the shares trading over 4,500p and close to record highs, is the price still fair? Probably.

Although the shares trade on 20 times 2019 forecast earnings and offer a dividend yield of just 3.3%, I think Unilever’s high profit margins and steady growth suggest that the shares could be worth a lot more in 10 years’ time. I’d rate the stock as a long-term buy.

A defensive bargain?

If you’re like me, you might prefer to buy quality businesses like Unilever when they’re out of fashion and going cheap.

One possible choice for bargain hunters is funeral provider Dignity (LSE: DTY). This national chain expanded aggressively for many years. Profit margins peaked at over 30%.

However, the Dignity share price has fallen by 75% since October 2016, as the company has been forced to slash its prices.

Tougher competition and price comparison are to blame. It now seems that Dignity’s impressive profits relied on hefty regular price rises to offset slowing growth.

Pre-tax profit fell by 43% to £40.5m last year and the group’s operating margin dropped from 30% to 21%. However, this is still an impressive figure and analysts expect profits to stabilise at this level.

If these forecasts are right, then I think the current share price could seem cheap in a few years. And while high debt levels remain a risk, the stock’s forecast P/E of 10 and 3.4% yield suggest plenty of bad news is in the price. I’d rate the shares as a speculative buy.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. 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.

The shares are down again today after the Competition and Markets Authority (CMA) announced this morning that it’s launched “an in-depth market investigation into the funerals sector.” Is this another nail in the coffin for Dignity, or is the stock one of the biggest turnaround prospects on offer today?

Indignity

The CMA’s concerns include:

• The rise in cost of organising a funeral, the essential elements of which have increased by 6% each year — twice the inflation rate — for the last 14 years.
• Lack of clear pricing and comprehensive information on quality and range, exploiting the vulnerability of many people when organising a funeral.
• Low numbers of crematoria providers in local areas, and difficulty for new companies to enter the market due to the planning regime and high fixed costs.
• High prices in relation to crematoria services — the largest private operators have implemented average price rises of between 6-8% each year for the past eight years.

The CMA has the power to make legally-binding orders requiring changes to be made, if it deems action is necessary.

Dignity’s response

A full investigation of the market by the CMA was always on the cards, which is why I think Dignity’s shares have shed only a relatively modest 3% on today’s announcement.

The company released a statement in response: “Dignity has engaged constructively with the CMA since the market study was announced in June 2018 and has made public its support for such an investigation, believing it could help improve standards across the sector and deliver better outcomes for customers.” Chief executive Mike McCollum added: “[We] look forward to continuing our work with the CMA and other industry bodies.”

Good value on offer

The ability to raise funeral prices ahead of inflation, and the barriers to new entrants to the crematoria market, were strong elements of the original investment case for Dignity. However, it became clear a couple of years ago, amid rising competition and cost-consciousness, that Dignity’s pricing strategy was unsustainable. The big reason why the share price is where it is now is that the company signalled a major reset of the business in January 2018.

Since then, it has introduced a transformation plan — in full awareness of the CMA’s concerns and in full expectation of today’s announcement. In its annual results earlier this month, the company confirmed a lower base for profit in 2019, and said: “In the medium-term the board believes that targeting solid single digit increases in underlying earnings is appropriate and achievable.”

At a current share price of 670p, the stock is on offer at just 9.8 times forecast 2019 earnings, with a running dividend yield of 3.6%. As the funerals industry remains an attractively defensive business, and as I don’t believe the CMA investigation will derail Dignity’s transformation plan, I see good value on offer for investors today. I rate the stock a ‘buy’.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

That all changed about 18 months ago when the company was required to cut prices to stave off competition. The more recent announcement of a probe by the Competition and Markets Authority (CMA) into the sector only served to compound investors’ misery. Dignity’s share price was 70% lower yesterday than it was back in November 2017. 

While I remain positive on the company as a whole, there wasn’t much in today’s full-year results to suggest that this is poised to spring back to life any time soon. 

“A period of radical change”

Despite a 2% rise in the number of recorded deaths to 599,000, pre-tax profit dived 43% to £40.5m over the 12 months to 28 December as Dignity reduced its prices and unbundled its full-service package so that clients weren’t required to buy everything from the company. 

Good performance from its crematoria division was the only bit of positive news I could find, aside from the business maintaining its total dividend at 24.38p per share (for a trailing yield of 3.4%).

Reflecting on today’s numbers, CEO Mike McCollum stated that last year “marked the beginning of a period of radical change” for Dignity. He went on to say that the firm’s commitment to the quality of the service it provides gave him confidence that the £370m cap will get “ahead of the competitive curve“.

While that remains to be seen, I agree that regulatory pressure can be a blessing to established firms by removing less competent competition, while tacitly endorsing the services of the former. 

Before this morning, Dignity’s stock was trading on a little under 11 times forecast earnings for the current financial year. The fact that the share price (while lower) hasn’t fallen off another cliff suggests that today’s figures were pretty much as expected.

As such, I suspect that those who bought in after recent falls and are patient enough to stand by the company will be rewarded in time. It’s a ‘hold’ for me. 

In the doghouse

Veterinary services provider CVS Group (LSE: CVSG) has also seen its share price collapse over the last year on issues surrounding recruitment and the performance of new acquisitions.

Like Dignity (and based on its January trading update), a sustained recovery still looks some way off. 

Despite reporting a 23.7% increase in total sales over the first half of its financial year, the company “remains heavily reliant on locum cover” and costs relating to this are “well above” those of the previous year.

Combine this with news that its new divisions focusing on Farm and Equine practices haven’t been performing well, a growing net debt position and the prediction that full-year earnings will be “materially below current market expectations,” and it’s easy to see why investors are turned off. 

Nevertheless, this could still be one for patient contrarians. A reduction in locum costs is expected in the remainder of the year and the company has wisely decided to re-evaluate its pipeline of potential acquisitions. Despite recent share price falls, there’s also the fact that the services provided by companies like CVS are likely to remain resilient in the event of an economic downturn. 

The company will confirm its interim results on 29 March. 

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

For example, LSE is the majority owner of clearing house LCH Clearnet, which provides the tedious but essential service of settling trades (among other things).

Clearing houses are a vital part of the financial system because they act as a trusted intermediary between traders around the world. Demand for this business is only growing. Last year, despite Brexit uncertainty, LCH Clearnet processed $1.1trn of complex derivative trades making the LSE’s clearing division by far the most significant player in Europe. And it’s a vital part of the European financial system.

Clearing isn’t only part of LSE’s sprawling business model. The group also provides technology and services for other exchanges such as the Norwegian Stock Exchange, which has used LSE’s tech to manage trading since 2009.

Market leader 

LSE’s leading market position indicates to me that this company isn’t going anywhere anytime soon. This leads me to conclude that the business will still be producing returns for investors 50 years from now, making it the perfect buy-and-forget income play.

Right now, the stock supports a dividend yield of 1.6%. Although that might not seem like much, the distribution has risen 100% over the past six years, and analysts are predicting double-digit payout growth per annum for the foreseeable future.

Essential  business

If you’re looking for a higher level of income, however, Dignity (LSE: DTY) could be a better buy. 

This company has run into some problems over the past 12 months and is now being forced to restructure its business model. As a result of these changes, City analysts are expecting earnings per share to fall by around 50% over the next two years. Still, as the UK’s largest funeral provider, Dignity has plenty of flexibility to adapt to the new environment. 

Unlike so many other businesses, which have to encourage customers to buy their product or service, death isn’t something we can avoid, which means Dignity will always have a steady stream of customers, no matter what happens.

With this almost guaranteed revenue stream, the company can take the time to re-focus the business and rebuild its reputation. As the process continues, it might be worth tagging along for the ride. Indeed, at current levels, the shares are hardly expensive, trading at a forward P/E of 9.3 and offering a prospective dividend yield of 3.4%. As the distribution is covered around three times by earnings per share, even after factoring in a 50% decline in profits over the next two years, it looks as if the dividend is secure for the time being. 

Although Dignity’s outlook isn’t as bright as that of the LSE, if you’re looking for a long-term income, I certainly think it is worth considering this company for your portfolio.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

A changing sector

As well as providing my mate with decent profits, there was always a steady supply of business because the death rate has been consistent over the years. And attractions like those led Dignity (LSE: DTY), the UK’s only listed provider of funeral-related services, to embark on a programme of buying up other funeral businesses in what looked like a push to consolidate the market.

However, things changed. It seems that bereaved loved ones have had enough of big funeral expenses and have been shopping around. Dignity now competes against providers willing to slash prices and the matter crystallised at the end of 2017 when the share price started sliding. The stock is now down around 60% and the firm announced it is pursuing a ‘more competitive’ pricing policy. It looks like 2018 will finish with earnings about 40% lower year-on-year.  

Reduced cash flow and profits have hampered the business model, which relied on a big pile of debt to finance the acquisition programme. With the cash taps turned down, that strategy looks unsustainable. In today’s Q3 trading update, the company said it invested £5.4m in acquiring four funeral locations in the year so far. But the directors said that “after careful consideration,” they have concluded that “the acquisition of small funeral businesses is at present inconsistent with the Group’s strategy and plans for the future.”

Time to move on?

That sounds like the end of Dignity’s previous growth model. Instead, it will concentrate on “delivering the transformation plan.” So, it looks like it is digging in to fight for survival. However, there is some hope for a turnaround in the business because the directors will look for “larger, more established” businesses to buy, and they also think new crematoria developments are “a good use of capital.”

But I’m sceptical and would move on from Dignity, perhaps to consider BT Group (LSE: BT.A) for its turnaround potential instead. The share price has been rising over the past six months and I think that could be due to investors buying because of the firm’s low-looking valuation. Meanwhile, the company is focusing on turning the business around and driving down costs. The new chief executive, Philip Jansen, is due to start in February and his main priority will surely be to arrest the decline in the business.

But the half-year report this month demonstrated the magnitude of the task ahead. Adjusted revenue slipped 1% compared to the equivalent period the year before, normalised free cash flow plunged 22% and net debt rose 25%. The figures are moving in the wrong direction and the directors expressed their concern by reducing the interim dividend almost 5%. BT Group is a bigger business than Dignity, and in the short term I think the turnaround opportunity is more attractive, but I’d still be reluctant to place a long-term bet on the company.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

However, saving for retirement isn’t easy. A lot can change in 50 years, and finding the companies today, that will still be around decades from now is difficult.

Still, a long-term buy-and-hold strategy is worth pursuing because it can pay off in a big way if you get it right. Here are three companies that I believe will still be around in 2068.

Consumer goods

Dairy Crest Group (LSE: DCG) tops my list because this business has already been operating for nearly 40 years, although in one way or another, the company, which was the marketing arm of the UK’s Milk Marketing Board, has been around since 1933.

I believe this is just the start of the Dairy Crest story. The firm’s Cathedral City brand is one of the most popular consumer brands in the UK, and sales are growing. Meanwhile, the company’s cooking spray and infant formula business provides an excellent hedge against volatile milk prices. 

Dairy Crest has a stable of products that are change-resistant. As long as people keep eating cheese, cooking food and feeding babies, Dairy Crest should continue to prosper. The shares yield 4.9% and change hands at 12.8 times forward earnings.

Death and taxes

They say there are only two certainties in life: death and taxes. So if you’re looking for a long-term buy, investing in one of these trends certainly makes a lot of sense.

Dignity (LSE: DTY) is an excellent play on the former. The largest, and only publicly listed, funeral provider in the UK, Dignity offers size and scale that no other company can match.

The firm is currently trying to cope with a wave of bad publicity regarding its pricing policies but management has acted to stem the issues. It introduced a low-cost alternative and is planning to invest £50m over the next three years to deliver £8m of annualised additional underlying operating profit by 2021. Despite having already rolled out the lower price options to customers, Dignity’s revenues rose during the first half. 

As long as the company does not overstretch itself, Dignity should continue to produce returns for investors for decades to come. Trading on a forward P/E of 14 and yielding 2.4%, the stock does not look too pricey either.

Self-storage

My final buy for the next five decades is self-storage company Big Yellow Group (LSE: BYG).

Big Yellow has built a robust business model. Properties are located in highly attractive positions, specifically in urban areas with excellent transport connections. They’re also large billboards for the business, which cuts down on marketing costs.

What I like about this business is its property estate. The company has 57 Big Yellow self-storage centres, on which it owns the freehold across London, the South East and large metropolitan cities. This works out at around 78% of its property portfolio.

These properties are an insurance policy for the group. If the self-storage business does not work out, Big Yellow can always sell or let its properties to developers or other companies. With most of the portfolio located in built-up areas, demand will be high. I’m confident the firm will be around, in one form or another 50 years from now. It currently yields 3.7%.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

However, if we look at BP’s long-term performance it only serves to show how exceptional the return of the past two-and-a-half years has been. It’s shares are up 8% over the last 10 years and 39% over the last 20. Even if we include its rich flow of dividends, 10-year annualised total returns of 4.6% lag well behind the 7.6% delivered by the FTSE 100 as a whole.

Value outed?

I think buy-and-hold investors will continue to do ok from BP but I also think a FTSE 100 tracker is a better option for buy-and-hold exposure to broad economic growth. With highly cyclical industries like oil, I reckon a value investing approach is a better strategy — buying stocks around cyclical lows and selling when you believe the value has been outed.

BP posted strong half-year results yesterday, showing the benefit of the significantly higher oil price this year than during the first half of last year. Analysts have been upgrading their earnings and dividend forecasts as the oil price has risen more buoyantly than previously expected. As such, at a current share price of 565p, BP trades on a forward price-to-earnings (P/E) ratio of 13.4 and prospective dividend yield of 5.5%.

However, my Foolish colleague Royston Wild recently explained why he believes the long-term fundamental outlook for the oil market “remains more than a little worrying.” The supply-demand dynamics Royston discussed may or may not play out, but certainly I can see a risk that they do. The value opportunity presented by BP’s shares in 2016 may have further to run but I take a prudent view that considerable value has now been outed. I’d be happy to sell the stock and bank profits at this stage.

Pricing reset

As a provider of funeral services and an owner of crematoria, Dignity (LSE: DTY) should be a relatively stable business and a good candidate for buy-and-hold investors. However, its shares crashed over 50% earlier this year. The group had been increasing its funeral prices in an over-supplied industry, where customers were becoming increasingly price-conscious. Management took the decision to radically reset its pricing and warned that results for 2018 would be substantially below market expectations.

Since then the company has been researching and trialling what customers in different segments of the market want. It has also been reviewing how it can organise its operations more efficiently and effectively. The result of this review was published in its half-year report today. The market liked it. The shares are trading over 5% up on the day at 1,066p, as I’m writing.

New strategy unveiled

Dignity’s new strategy is built around enhancing the customer proposition, simplifying the operating model and streamlining support for operational staff. The three-year transformation plan will cost £50m (£17m from property disposals and £33m from existing resources) and management anticipates delivering £8m of annualised additional underlying operating profits by 2021.

The strategy looks sound to me and the transformation costs and additional profits appear eminently achievable. I’d say a P/E of 15.2, based on 2019 forecast earnings, undervalues the medium-term and long-term prospects of the business. As such, I rate the stock a ‘buy’.

The post The BP share price has been hitting multi-year highs. Time to sell? appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Just how bad could it get for the BP share price?
• BP shares are falling. But is the oil market actually tighter than investors think?
• How much is needed in a Stocks and Shares ISA for £357 of weekly passive income?
• Oil prices are falling. So why am I still bullish on BP shares?

G A Chester has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.