The move follows a 39% collapse in the growth trust’s share price since the last quarterly review of the FTSE indexes. The shares closed yesterday at 45p, representing a discount of 40% to its last published net asset value (NAV) of 74.43p.

On paper, Patient Capital appears to offer great value. Here, I’ll explain why I see it as a stock to avoid.

Discount

A month before the gating of his flagship Equity Income fund in June, I warned readers the House of Neil Woodford could be about to collapse. I’d been bearish on his Patient Capital Trust from way back in January 2018 (when the shares were 83p and trading at a discount of less than 10% to NAV), explaining why I believed the discount should be much wider.

However, due to the ramifications of the gating of his Equity Income fund, which has significant cross-holdings with Patient Capital, even the current 40% discount isn’t wide enough to tempt me.

Cornerstone investors under pressure

Woodford is in the process of clearing out the unlisted stocks from his Equity Income fund to raise cash in order to meet redemptions when the fund is ungated. Meanwhile, he’s also a seller with his Patient Capital hat on, having agreed with the trust’s board to clear a maxed-out £150m overdraft within 12 months.

Elsewhere, IP Group, another early-stage investment company, is backed by Woodford, as well as being a fellow cornerstone investor in many of the same unlisted companies. IP’s shares have also collapsed to a steep discount to NAV, making it difficult for it to raise fresh cash to support the investee companies.

Another under-pressure cornerstone investor is Invesco Perpetual. When Woodford left Invesco, he left his protégé Mark Barnett with big positions in many of the same unlisted companies he went on to buy for Patient Capital and his new Equity Income fund.

Omnishambles

With Woodford now a seller and key fellow cornerstone investors not best placed to take shares off his hands, the valuation of the investee companies will inevitably come under pressure. Any new investor willing to relieve Woodford of his shares will want a hefty discount.

Furthermore, with many of the investee companies being loss-making, and requiring more rounds of funding to have any hope of reaching commerciality, it’s not in their interest to see Woodford sell his shares to a new investor. This raises no cash for the companies themselves.

Far better for them to keep Woodford locked in by offering any interested investor new shares at a discount to Woodford’s selling price. This raises cash for the companies, rather than for Woodford, but puts further downward pressure on their valuation and on Patient Capital’s NAV.

Frankly, I think the situation is an omnishambles, and it’s impossible to estimate what Patient Capital’s true NAV might end up as when everything’s played out. For now, I see the trust as uninvestable.

The post Why I’d still shun the Woodford Patient Capital share price at 45p 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.

According to my calculations, the two are currently the bottom-ranked FTSE 100 companies. They’re poised to be pushed out of the blue-chip index by FTSE 250 firms Polymetal International and Hikma Pharmaceuticals, which both occupy automatic promotion slots.

Do I think now is a good time to buy shares in any of the four companies?

No spark at Marks

Marks & Spencer has been in the FTSE 100 ever since the index was established in 1984. It narrowly escaped demotion at the last quarterly review, but I think it would take a miracle for it to dodge the bullet this time around.

The sinking value of the company, and the humiliation of its demise from blue-chip bellwether to just another mid-cap retailer, is symbolic of the troubles on the UK high street, but also testament to M&S’s repeated failures to successfully adapt its business over the last two decades.

It may have a single-digit P/E and high dividend yield, but the bottom line is this is a structurally challenged company in a structurally challenged sector. Is it a stock I need to own? No, has been my answer for a long, long time. And I continue to see it as one to avoid.

Mad cap

Arguably, Centrica, which also trades on a low P/E and high yield, is a similarly challenged company. However, it’s a utility, not a retailer, and while it has some similarities with M&S in the consumer-facing part of its business, the main challenges it faces are rather different.

Regulatory headwinds, notably a price cap on certain tariffs imposed on energy companies earlier this year, have had a damaging impact on profitability in the sector, and even on the viability of some companies. History suggests heavy-handed regulatory price caps, which produce market distortions and unintended disincentives, get discarded sooner or later. And for this reason, I wouldn’t entirely write Centrica off.

For sure, it faces a host of challenges, but I think the business can survive and recover when the madness and pernicious consequences of price caps become apparent, and policy is changed. Personally, I wouldn’t buy the stock today, but if I owned it I’d be inclined to continue to hold.

Two I’d buy

I named gold miner Polymetal as my top share for 2019 at the start of the year. Despite the strong rise that’s taken it to the brink of entry into the FTSE 100, I still see value in the stock and rate it a ‘buy’. It has a low double-digit P/E and forecast high-teens earnings growth, as well as a decent 4% dividend yield.

Generic medicines firm Hikma is more highly rated, on a high-teens P/E and with a sub-2% dividend yield. The company has yo-yoed in and out of the FTSE 100, but I think the long-term outlook for the business is so promising that it’ll become a fixture in the top index in due course. As such, I also rate this one a ‘buy’.

The index changes announced by the FTSE on Wednesday will take effect from Monday 23 September.

The post Marks & Spencer and Centrica set for FTSE 100 exit. Time to buy? 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 recommended Hikma Pharmaceuticals. 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.

According to my calculations, they’re currently the Footsie’s bottom-ranked constituents, and are set to be pushed out by FTSE 250 firms JD Sports Fashion and Aveva, which both stand poised for automatic promotion to the top index.

Do I think now is a good time to snap up shares in any of these companies?

Earnings multiples

My colleagues have been almost universally bullish on JD Sports for many years — and continue to be impressed by the company’s blistering growth. At a share price of 618.8p (market cap £6bn), it trades on a forward price-to-earnings (P/E) ratio of 20. I see a good business, but a multiple that’s a bit too rich for my liking in the retail sector, and I rate it a ‘hold’.

Software group Aveva just missed out on promotion in the last quarterly reshuffle, but its shares have continued to rise and now sit at 3,460p (market cap £5.6bn). I see this as another good business, but on a forward P/E of 36, I maintain my previous view that the sky-high earnings multiple makes it a stock to avoid.

Meanwhile, low earnings multiples (and high dividend yields) at Marks & Spencer and easyJet, suggest potential value on offer. However, I believe only one of the two represents a great investment proposition.

Green shoots (again)

In its annual results last week, M&S’s management spoke of “good progress in restoring the basics,” signs of “green shoots,” and so on. However, we’ve heard this time and again over the past few decades from previous management teams and turnaround plans at the company.

Sure, the current team has made a bold move in announcing a new joint venture with online grocer Ocado, but this strikes me as something of a ‘Hail Mary pass’, that is, a long shot. The price M&S is paying — up to £750m — is widely considered expensive. And long-suffering shareholders are being asked to cough up over £600m in a rights issue, as well as seeing their dividends slashed by 40%.

I’ve been saying for years that if I owned the stock, I’d be happy to sell and buy into a business with a more promising outlook. I see no reason to change my view at a share price of 246.3p (market cap £4bn), with a forward P/E of 10 and prospective dividend yield of 4.5%.

First-rate business

While I see M&S as a structurally challenged company in a structurally challenged sector (and a value trap for investors), I’m far more optimistic about easyJet. I think there’s genuine value on offer at the budget airline, whose share price of 919p (market cap £3.6bn), gives a forward P/E of 8 and prospective dividend yield of 6.2%.

Of course, for a company to be on such a cheap rating, investor sentiment has to be against it. In half-year results earlier this month, easyJet pointed to headwinds from “the ongoing negative impact of Brexit-related market uncertainty as well as a wider macroeconomic slowdown in Europe.”

I see a proven first-rate business in a cyclical, rather than structurally challenged, industry. I reckon the valuation of the stock is attractive for long-term investors, and I rate it a ‘buy’.

The post Marks & Spencer and easyJet poised for FTSE 100 exit. Time to buy? 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.

As things stand, two FTSE 250 companies are set for promotion to the FTSE 100, with two current blue-chips heading for relegation to the second-tier index. Who are the winners and who are the losers? And should investors be looking to back the rising stars or their out-of-favour counterparts?

Income buy

Flying FTSE 250 insurer Phoenix Group looks nailed-on for automatic promotion to the top index. Its shares ended last week at 700p, giving it a market capitalisation of a bit above £5bn. According to my sums, this would rank it at 86 in the FTSE 100 — one place below wealth manager St. James’s Place and one place above engineering group Spirax-Sarco.

My Foolish colleague Roland Head has written about the attractions of Phoenix’s business. And with its prospective yield of 7% for 2019, I agree with Roland’s assessment that “the stock rates highly as a pure income buy.”

One I’d avoid

Barring a big drop in its share price before Tuesday’s market close, Phoenix’s automatic entry to the elite 100 is assured. But it’ll be a closer-run thing for engineering and industrial software specialist Aveva Group (LSE: AVV). My calculations say it currently sits bang on the automatic promotion threshold rank of 90.

Many of my fellow Fools have cautioned against this stock, due to its high earnings multiple and low dividend yield. Nevertheless, its share price has continued to rise defiantly, closing on Friday at 3,052p, giving it a market capitalisation of £4.9bn.

I view Aveva as an attractive and well-managed business. However, trading at over 36 times current-year earnings expectations, with a skinny prospective dividend yield of 1.5%, I’m inclined to agree with my colleagues that the sky-high valuation makes it a stock to avoid.

I would buy Wood

If Aveva does join Phoenix in the top index, the two companies in line to be culled are current bottom-ranked FTSE 100 stock John Wood Group (share price 533.4p; market cap £3.6bn) and second-bottom-ranked GVC Holdings (LSE: GVC) (share price 631.5p; market cap £3.7bn).

My fellow Fool Roland Head has written positively about oil services business Wood Group. Trading on a modest forward earnings multiple (10.4 at the current price), with a good prospective dividend yield (5.3%), I certainly see this stock as worthy of a ‘buy’ rating.

My pick of the field

However, my top ‘buy’ is multinational sports betting and gaming group GVC. It owns some of the industry’s leading brands, including sports betting-led brands Ladbrokes, bwin, Coral and Sportingbet, as well as games-led brands such as Gala, partypoker, PartyCasino and Foxy Bingo.

It has a further revenue stream from providing online gaming services on a business-to-business basis to a number of third-party operators, including MGM in the US, PMU in France and Danske Spil in Denmark.

This is a highly cash-generative business, with a strong record of delivering value for investors through organic growth and acquisitions. Trading on 10.6 times forecast 2019 earnings, with a prospective 5.4% dividend yield, the shares are a snip in my book.

The post Which stocks will be in and which will be out in the FTSE 100 spring reshuffle? 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 recommended GVC Holdings. 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.

Today, I’m looking at the fix Royal Mail’s got itself into. And the question of whether this could actually be a good opportunity to snap up shares in the company.

Profit warning

Over £1bn has been wiped off the value of Royal Mail since the last index review. At a share price of 340p, its market capitalisation is £3.4bn. The reason for this state of affairs is a massive profit warning issued at the start of October.

Management said UK productivity performance had been “significantly below plan.” As a result, it slashed its cost savings guidance for the year ending March 2019, to £100m from its previous £230m. It said it expects adjusted operating profit, before transformation costs, to be in the range of £500m-£550m. At the midpoint, this would be 24% below last year’s level. And the consensus among City analysts is that it would feed down to a 40% collapse in earnings per share (EPS) to 27.3p, giving a price-to-earnings (P/E) ratio of 12.5.

Potential double whammy

In my view, Royal Mail’s P/E is demanding. I see high risk of a further profit warning and a double whammy of deeper EPS downgrades, and a derating of the P/E to single digits.

The group’s letter business is in structural decline, with volumes currently falling at 7%, versus the company’s continuing medium-term expectation of declines of between 4% and 6%. The size of the productivity miss is a big concern, in my book. A gain of just 0.1%, reported with the profit warning, was revised to minus 0.2% in the company’s half-year results, management explaining it had “refined the calculation of workload.” The failure to make £130m of productivity gains this year, and in excess of that amount required next year just to offset ‘known knowns’ in cost inflation, makes this a company running at full pelt and struggling just to stand still.

The balance sheet is decent enough at the moment, but I can see current net debt of £470m rising quite dramatically in coming years. And while this year’s forecast dividend of 24.6p (yield of 7.2%) looks safe, I wouldn’t be at all surprised if management has a rethink on the future payout level.

The demotion of Royal Mail to the FTSE 250 looks very much on the cards. But this is a minor negative, compared with the severity of the downside risk should the aforementioned double whammy of lower EPS and a P/E derating materialise. As such, it’s a stock I’m happy to avoid.

The post Royal Mail is set to be kicked out of the FTSE 100, but could it be time to buy? 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.

Elsewhere, ace fund manager Neil Woodford is set to receive another blow to his recently tarnished reputation, as his Woodford Patient Capital Trust(LSE: WPCT) is set to be kicked out of the mid-tier FTSE 250 into the FTSE SmallCap index.

Transformational deal

Ocado’s spectacular rise has come on the back of a fifth — and transformational — licensing deal, announced earlier this month. I believe this deal, with the US’s biggest traditional grocer Kroger, seals Ocado’s transition from a small, upstart UK grocery player to a global technology supplier for online grocery retailing.

The company had been promising this for years and its shares were always overvalued based solely on its UK business. The question for investors now is whether the recent rise in the shares has fully valued Ocado’s transformation into a global business or whether the market is underestimating the company’s prospects.

Build it and they will come

Ocado has a market cap of approaching £6bn, as I’m writing, which compares with, for example, Marks & Spencer at £5bn. Their respective revenues last year were £1.5bn and £10.7bn. However, a number of analysts model future revenues and cash flows that suggest there’s significant upside for Ocado’s shares. And this is without further international deals for its Smart Platform system, which now appears to have achieved go-to status.

The large number of projects Ocado has on its plate presents a degree of execution risk, but management’s record of operational excellence gives me confidence it can deliver. With the company now having demonstrated not only that it can ‘build it’, but also that ‘they will come’, I’m inclined to rate the stock a ‘buy’.

Poor risk/reward

In contrast, I moved Neil Woodford’s underperforming Patient Capital Trust onto my ‘sell’ list at the start of this year. This was on the basis that the trust has morphed into a far higher-risk proposition than when it was launched. I suggested that a discount of less than 10% to net asset value (NAV) was far too narrow for the increased risk.

Patient Capital is invested in ‘disruptive’ businesses (but not Ocado) and has seen a number of significant failures. The shares have fallen around 10% since January — precipitating the trust’s imminent demotion from the FTSE 250 — but the NAV has also fallen. As such, the discount is still less than 10% and the stock remains on my ‘sell’ list.

Changes to the FTSE indexes, including the likely ejection of security firm G4S from the FTSE 100 to make way for Ocado, will take effect from the start of trading on Monday 18 July.

The post Ocado is set to storm into the FTSE 100. Time to buy? 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.

Meanwhile, a whole host of firms — including some notable names — are set to be booted out of the FTSE 250 index, with some fast-growing small-caps you may not have heard of moving up to mid-cap status. More on these shortly, but first the reshuffle at the top table.

Hammered

I wrote about Hammerson’s troubles earlier this week. In brief, the company’s looking to acquire heavily indebted FTSE 250 firm Intu Properties in a £3.4bn all-share deal. Hammerson’s shares have fallen over 15% since the announcement, taking its market capitalisation below the threshold for automatic ejection from the FTSE 100.

Red letter day

Royal Mail, which suffered the same fate in last September’s reshuffle, began to bounce back strongly later in the year. Its shares have soared by more than 50% — from 370p at the start of November to 564p at yesterday’s market close. Its £5.6bn market-cap puts it comfortably above the threshold for automatic promotion to the FTSE 100.

The strong rise in Royal Mail’s shares has come on the back of healthy trading updates and the reaching of an agreement with the Communication Workers Union. City analysts expect the company to post earnings per share (EPS) of 41.8p for its financial year to 31 March and a dividend of 24p. This gives a price-to-earnings (P/E) ratio of 13.5 and a dividend yield of 4.3%. Not unattractive, but the trade-off is forecasts of only anaemic earnings and dividend growth. That’s because letters are in structural decline and while parcels are a growing, they’re in a highly competitive market.

Breakdowns and funerals

According to my sums, as many as seven companies are set to be kicked out of the FTSE 250. These include roadside recovery group AA and funerals firm Dignity.

Neil Woodford isn’t the only investor who will be ruing the day he backed AA’s stock market flotation in 2014 at 250p a share. The debt-laden firm, which recently slashed its dividend, is currently trading at 79p. Dignity’s shares have more than halved in value since it issued a massive profits warning in January. It was obliged to reset its funeral prices, having discovered that regularly hiking them in a competitive market was unsustainable.

The sun has got his hat on…

One of the most interesting small-caps set for promotion to the FTSE 250 is On the Beach (LSE: OTB). This online specialist in short-haul holidays was floated at 184p a share in 2015. The shares are currently trading at 579p, valuing the business at over £750m.

Despite the stunning rise in the price, the company — which issued a trading update full of encouraging news earlier this month — still looks good value to my eye. City analysts are forecasting a 25% increase in EPS to 22p for its current financial year (ending 30 September), giving a P/E of a bit above 26. High annual EPS growth is forecast to continue in subsequent years, rapidly reducing the P/E and making the stock very buyable in my book.

All the changes to the indexes, which the FTSE committee will announce later today, will take effect from the start of trading on Monday 19 March.

The post Flying Royal Mail plc set for FTSE 100 re-entry appeared first on The Twelfth Magpie.

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• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

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.

However, as things stand Babcock International and Merlin Entertainments are sitting well below the automatic demotion threshold of position 111th. Their shares would need to rise significantly in the remaining trading sessions to avoid the drop into the FTSE 250. Conversely, FTSE 250 firms DS Smith and Just Eat are ranked comfortably above the automatic promotion threshold of 90th and are on for promotion to the FTSE 100, barring a dramatic fall in their shares.

In addition, Mediclinic International and Convatec are teetering on the brink of an automatic FTSE 100 exit, with relatively minor movements in their shares before Tuesday’s close set to decide their fates. If both were to exit, Halma and John Wood are currently sitting in prime positions to join DS Smith and Just Eat in the FTSE 100.

Heading up

International packaging group DS Smith was knocking on the door of the top index last quarter but is set to storm over the threshold this time. A strong trading update at the end of October — discussed by my Foolish friend Rupert Hargreaves — has propelled the shares higher. Rupert sees an undemanding valuation and believes the company can continue to achieve double-digit annual returns for investors.

The ascent of takeaway ordering platform Just Eat has been even more impressive. The company only listed on the stock market in 2014 (at a share price of 260p) but the shares have climbed relentlessly to over 820p. This has come on the back of rapid international expansion and spectacular revenue and earnings growth. There aren’t too many high-growth companies in the FTSE 100 but Just Eat’s earnings are forecast to continue soaring.

Heading down

Babcock International is an engineering services company with a focus on the defence, energy, transport and emergency services sectors. Sentiment towards the defence sector was hit by a profit warning from Ultra Electronics earlier this month. Babcock has remained out of favour this week after releasing its half-year results on Tuesday. My Foolish friend Edward Sheldon thought the results looked robust and concluded that the shares are oversold and appear to offer strong long-term value.

Merlin Entertainments’ expected drop to the FTSE 250 comes after business at its Madame Tussauds, Legoland and other attractions wasn’t helped by this year’s unfavourable summer weather and terrorist attacks in the UK and Europe. However, management said it remains confident in the longer-term prospects. So, this might be another case where the shares are oversold.

The changes to the indexes the FTSE committee announces on Wednesday will take effect from the start of trading on Monday 18 December.

The post 3 companies set to be ejected from the FTSE 100 appeared first on The Twelfth Magpie.

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• Forget meal deals! Here’s how £8 a day could be worth £357,000
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• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended DS Smith, Halma, Just Eat, and Ultra Electronics. 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 reshuffle is based on market capitalisations at yesterday’s closing prices and, according to my calculations, Royal Mail is also set to exit the FTSE 100, having slipped just below the automatic demotion level at the eleventh hour. My sums say this would pave the way for housebuilder Berkeley to be promoted in its place.

Unmitigated disaster

Provident Financial has seen £3.2bn wiped off its stock market value since the last FTSE quarterly review in May. Its shares have nosedived 70% from 3,057p to 906.5p at yesterday’s close. Two spectacular profit warnings have done for the group. It’s now valued at £1.3bn and doomed for demotion to the FTSE 250. It’s a sorry day for a company that had gained its FTSE 100 status in December 2015, having thrived after the financial crisis, as traditional banks withdrew from higher-risk lending.

The cause of Provident’s woes has been a switch to a new operating model in its home credit division. This has seen a fundamental change from its traditional model of serving customers via an army of self-employed agents to employing in-house ‘Customer Experience Managers’ and greater use of software. So far, it’s been an unmitigated disaster, with reduced agent effectiveness resulting in a progressive deterioration in collections, sales and customer retention.

Positives and negatives

There’s an argument that the fall in Provident’s shares is overdone, put forward by major shareholder Neil Woodford, among others. Making some huge assumptions, he suggested a valuation of three times potential 2019 earnings with a potential dividend yield for the year of 15% — albeit at the time he was writing (the day of the second profit warning), the shares were trading at an intra-day price of around 520p.

However, with the company having downgraded its home credit division, profit for the current year to £60m from £110m at the first profit warning and then to a loss of between £80m and £120m just nine weeks later, this is a major crisis and there is zero earnings visibility. The chief executive has departed, the dividend has been suspended and one of the products of its banking division is also under investigation by the Financial Conduct Authority. I can only see Provident as a stock to avoid for the time being.

New entrant

There’s a far happier story for NMC Health’s shareholders, with their company’s ascension to the FTSE 100. Since the last quarterly review, its shares have risen 22% from 2,187p to yesterday’s close of 2,670p, giving it a market cap of £5.5bn.

This fast-growing and leading private sector healthcare operator in the United Arab Emirates trades on a high 34 times current-year forecast earnings. However, with earnings expected to grow at 30% a year for the next couple of years, I see scope for the shares to make further advances and for the company to climb up the FTSE 100 rankings. As such, I rate the shares a ‘buy’.

The post Provident Financial plc set for FTSE 100 exit and NMC Health plc to replace it appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

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. 

According to my sums, Hikma Pharmaceuticals is also teetering on the brink of demotion, which could pave the way for Segro to join G4S in the top index.

Meanwhile, Sirius Minerals (LSE: SXX) is set to jump straight into the FTSE 250 following its recent move to the Main Market from AIM.

More to come?

It looked at one time as if G4S had established itself as a fixture in the FTSE 100. Having entered the index in 2007, the multinational security group performed relatively well through the market crash of 2008/09 and emerged as a middle-ranked blue-chip.

However, a combination of company problems and a recovery in the wider market saw it sink down the rankings to such an extent that it was demoted to the FTSE 250 in December 2015. Its shares went on to hit a multi-year low of 164p last summer.

Since then, the turnaround of the business has gained traction and the share price has just about doubled. Could there be more to come?

A forward P/E of 17.5 on forecast earnings growth of 17.5%, gives a rating bang-on the ‘fair value’ price-to-earnings growth (PEG) marker of one. However, analysts have been revising their earnings forecasts upwards and there could still be decent gains to be made here if that trend continues.

Contrarian buy?

It would take a miracle in the next couple of trading days for Intu Properties to avoid being ejected from the FTSE 100. It currently sits eight places below the automatic demotion threshold.

The company is largely focused on UK shopping centres. The shares have declined as investors have turned cautious on the prospects for the business in light of the challenging trading environment facing retailers and the considerable uncertainty regarding the UK’s EU exit.

I think investors are right to be cautious. I’m not convinced a P/E of 18 and a vulnerable-looking 5.2% dividend yield are sufficiently attractive to make Intu’s shares a contrarian buy.

Substantial rewards?

Shares of Sirius Minerals were trading at 18.25p on London’s junior AIM market when I last wrote about the company in February. They’re now 10p higher following positive news flow on the development of its massive North Yorkshire polyhalite project and a move to the Main Market. With a capitalisation of near to £1.2bn, Sirius is set to catapult straight into the FTSE 250.

If the company delivers its project on time and on budget, and meets its volume and price targets, I reckon the market cap could be above £15bn in 10 years’ time. To put that into context, Tesco is currently valued at £15.3bn and ranked number 34 in the FTSE 100.

Of course, with five years of construction and 10 years to targeted full production, Sirius is a proposition for risk-tolerant, patient investors with a long-term horizon. However, the rewards could be substantial if things go broadly to plan.

The post G4S plc set for FTSE 100 promotion. Sirius Minerals plc to enter FTSE 250 appeared first on The Twelfth Magpie.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals. 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.