As Donald Trump’s trade tariffs news shakes the FTSE 100 some of my favourite UK stocks are suddenly trading at massive discounts.
I was running down the long list of FTSE fallers and found that five of my top picks have all dropped roughly 15% in just a week. They’re cheaper than before, but the problem is they’re riskier too. Should investors consider them today?
HSBC Holdings has an even bigger yield
I was a whisker away from buying HSBC Holdings last month. Now I have a second chance, and at a cheaper price.
HSBC’s trailing yield has now jumped to 6.86%. That’s insane. The price-to-earnings ratio is today even lower at 7.85%. But will those earnings hold up?
The board has been battling to avoid getting squashed between a US rock and a Chinese hard place. As the world’s two biggest economies swap tariff threats, the highwire act is getting harder to pull off.
International Consolidated Airlines Group tempts
International Consolidated Airlines Group, or IAG, was number two on my shopping list after HSBC. Travel demand has come roaring back post-Covid, and the British Airways-owner looked poised to benefit from resurgent transatlantic travel.
But tariffs and trade tensions could threaten that, while economic worries could hit both business and personal travel. I fear there’s more pain to come here. I think it’s too early to consider buying today’s dip.
Barclays could benefit from volatility
The Barclays share price has had a stellar year but now it’s falling. This is either an early warning shot, or a brilliant buying signal. A P/E of 6.95 times is cheap, but can earnings be relied upon?
A tariff-fuelled slowdown could hit credit demand and increase default risks dramatically. Although today’s volatility may boost activity at its investment banking arm. Risky, but one to consider. Income seekers may favour HSBC’s higher yield though.
BP shares fall with the oil price
With Brent crude down to $63 a barrel, BP’s profits could take a real hit. It was already scaling back quarterly share buybacks, and that may accelerate. The trailing yield of 6.8% is tempting, if dividends hold up. BP has been bumpy for years. That looks set to continue. Throw in green transition risks and I’d urge caution.
Intermediate Capital Group (LSE: ICG) is a fascinating one. Despite falling heavily this week, the shares are still up 35% over 12 months and more than 80% in five years.
It’s now trading at just five times earnings, which looks like a bargain. But I’d caution that earnings might not be as solid as before.
Private equity is under pressure, with many investors fleeing risk. And while ICG raised an impressive $7.2bn of funds in Q3 alone, and $22bn over 12 months, that pace may not continue if markets slump.
It reported assets under management of $107bn, with fee-earning AUM at $71bn. Strong numbers, but again, they’re based on a calmer market backdrop.
ICG’s more of a growth play than an income one, but the yield has crept up to 3.5%, which I see as a bonus. If markets calm, ICG could bounce hard.
Investors considering any of these shares must take a five to 10-year view. Over such a lengthy period, today’s sell-off could be a brilliant opportunity.
This post was originally published on Motley Fool
