Best 3 FTSE 100 stocks to watch in July
We examine three of the best performing FTSE 100-listed stocks that have managed to see their share price bounce back effectively amid the economic impact of the coronavirus pandemic and worth keeping an eye on throughout July.
For the FTSE 100, gains this week have stalled at 6250, as they did last Friday. This tends to reinforce the near-term bearish view, potentially opening the way to more declines, according to Chris Beauchamp, chief market analyst at IG.
‘Rising trendline support from Thursday is being tested as the day gets underway in the cash session, with 6110 and 6070 as possible support levels in the event of a further decline,’ he added. ‘Below 6070, the 5950 lows from the middle of the month are the next target.’
The road to recovery for UK stocks remains bumpy, but the FTSE 100 managed to post a 9% rally for April-June, driven by some of its top performers. IG examines three of the best performing stocks on the blue-chip index of late and how they are likely to perform throughout July.
Bunzl shares rise as sales surge amid Covid-19 stockpiling
The British multinational distribution and outsourcing company saw its share price take a major tumble just like every other stock on the FTSE 100 when the UK government imposed lockdown restrictions across the country. However, the stock has not only rebounded strongly but continues to outperform the broader market with it up 5.5% year-to-date, while the blue-chip index is down 19% over the same period.
Since hitting a low of £12.77 per share at the height of the coronavirus in mid-March, Bunzl has seen its share price take signifcant strides to claw back its losses, with the stock climbing more than 70%. Its stock’s sharp rise reflects a major spike in sales the company saw due to customer stockpiling amid the coronavirus pandemic.
In fact, revenues at Bunzl over the last six months to 30 June climbed 6%. The company also boasts a healthy balance sheet with strong cashflows – giving it ample headroom amid the challenging market conditions that it faces.
As a consequence many analysts have given optimistic outlooks for the stock, with JP Morgan upgrading its rating for Bunzl to ‘overweight’ in June and a target price of £23.50 – implying a potential upside of 7.3%.
Bunzl closed 1% higher on Wednesday at £21.90 per share.
Pearson shares surge as activist investor eyes strategy overhaul
Another stock to watch throughout July is Pearson, which since hitting a low of 423p per share in mid-May has been trending higher to become on of the biggest risers on the FTSE 100 over the last 30 days.
In fact, since hitting its year low, the multinational publishing and education company has seen its share price surge 34%, spurred by the activist shareholder Cevian Capital disclosing that it had built up a 5.4% stake in the business - the shareholding makes it Pearson's fifth largest investor.
In a filing in the US, Cevian said it ‘has discussed and intends to continue to discuss numerous operational and strategic opportunities to maximise shareholder value with [Pearson's] board of directors and/or management, including, without limitation, opportunities to improve management.’
Cevian’s significant stake in the company will give it enough clout to steer the company’s choice of new CEO, with John Fallon set to leave this year after several years at the helm. During his time in charge of the company Fallon opted to sell the Financial Times and its stake in book publisher Penguin Random House to focus on educational publishing and pivot the business towards digital products.
That strategy turned out to be unsuccessful, however; evident by the fact the company has issued a string of profit warnings. But investors appear to welcome Cevian’s presence at the company and if the activist investors is successful in instigating a major overhaul of the business that is capable of bringing it back to profitability, its share price is likely to trend higher and certainly one to watch in this month.
Prudential looks to create independent US operation
The insurance sector was dealt a major blow by the Covid-19 crisis and British insurer Prudential was certainly was hit hard, with the company’s stock falling by more than 52% to a low of 710p per share in mid-March. Since then the stock has recovered, with investors buying in at that low level rewarded with the share price surging more than 70% since the crash.
Even better news for investors, is that Prudential’s share price rally is not over just yet, at least according to market analysts, with Deutsche Bank reiterating its ‘buy’ rating for the stock last month and issuing a target price of £13.25 per share – implying a potential upside of 8.8%.
The Pru recently reinsured $27.6 billion (£22 billion) of US liabilities with leading US-based retirement services group, Athene, after the company took a stake in Prudential’s North American unit Jackson.
The deal will help bolster the balance sheet of Jackson, Prudential's US division, and give Athene an 11.1% stake in the common equity of the business. The deal will also help shore up Jackson’s capital cover ratio as Prudential eyes the business for a potential initial public offering (IPO), which will help the UK-based insurer to create an independent US operation.
‘We are delighted to be forging a new relationship with the team at Athene, given their deep expertise in the US annuity sector and long-term commitment to its development,’ Prudential CEO Mike Wells said in a statement.
‘This agreement is a key step forward in meeting our strategic objectives for Jackson,’ he added.
Prudential closed at £12.17 per share on Wednesday, with the stock down 15.5% year-to-date.
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