Anyone who described the second half of 2019 as a bad period for Evraz (LSE: EVR) could surely be considered a master of understatement. Its share price has more than halved in value since the beginning of June, making it the worst performer across the FTSE 100 in that time. As a consequence, it’s worth 28% less than it was at the start of the year.
The steelmaker and iron ore miner has been crushed as fears have grown over the spluttering global economy and, more specifically, the slowdown in China and the threat of economically-damaging trade wars spreading into 2020. Judging by latest data from the World Steel Association showing the rate at which steel production is falling, investors in Evraz clearly have a lot to worry about.
City analysts predict the company will follow an anticipated 51% earnings drop in 2019 with an 11% decline next year. The risks of more sharp share price weakness in 2020 means I’m not tempted to buy this specific firm, in spite of its low forward P/E ratio of 6.2 times and monster 9.8% dividend yield.
The recent diver
Glencore (LSE: GLEN) is another Footsie share that’s suffered badly in 2019, the mining colossus dropping 26% in value since the bells rang in New Year’s Day. This business has dropped on the same concerns over commodity demand in the short-to-medium term, but more heavy weakness emerged this week followed news lawmakers were launching a probe into its activities.
On Thursday, the firm declared in a brief market update that the Serious Fraud Office “has opened an investigation into suspicions of bribery in the conduct of business of the Glencore group.” The US Department of Justice is already is already studying claims of corruption in the Democratic Republic of Congo, Venezuela and Nigeria, and this new investigation gives investors more to fear in the new year.
On the brighter side, City analysts expect Glencore to print a 55% rise in net profit in 2020. Projections of any sort of bottom-line bounceback look more than a little far-fetched in my book, though, and so I’m happy to avoid the firm despite its low forward P/E multiple of 11.2 times and huge 5.8% corresponding payout yield.
The emerging markets star
Footsie share Prudential (LSE: PRU) has also endured some severe share price weakness in the latter half of 2019, causing its share price to drop 6% since the beginning of January. The hiving off of its UK and European operations into the separately-listed M&G didn’t help, though fears over worsening economic conditions in Asia was already depressing investor appetite for the stock.
A shame, if you ask me. It’s possible that, with key data coming out of Beijing gradually worsening, that 2020 could prove another challenge for ‘The Pru’s’ share price. I remain convinced, though, the combination of low product penetration and solid growth in emerging nation consumers’ income levels should keep the insurance giant’s profits rising in 2020.
City analysts agree and are predicting a solid-if-unspectacular 6% earnings increase, one which supports expectations of more dividend growth and therefore a decent 3% yield. A forward P/E of 9.2 times too marks an attractive entry point for long-term investors to buy in at, in my opinion.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Prudential. 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.
Motley Fool UK 2019