... AND START WITH THESE SIX SHARES
RUSS Mould, investment director at wealth platform AJ Bell, believes that when markets fall it is durable companies that investors should seek out.
He says: ‘If there is real panic, firms with strong competitive positions, sound business models, good management and robust finances could fall as much as stuff that maybe deserves to be sold. These quality names might be ones to focus on. They don’t need to be knock-down cheap, just reasonably valued.’
Here are six companies that Mould suggests it may be worth keeping an eye on for a share price drop.
1. B&M EUROPEAN RETAIL
What it does: B&M sells everything from baked beans to vacuum cleaners to toys in its 681 stores – all at low prices.
Why Mould likes it: This valuedriven proposition could really chime with consumers in a time of inflation.
Why it could offer good value: Its shares are hardly expensive now and have a dividend yield of 3.5 per cent. A steep sell-off could leave them on an even more tempting valuation.
Current share price: £5.44.
2. DIAGEO
What it does: It is one of the world’s biggest producers of beer and spirits, including Smirnoff, Baileys and Johnnie Walker.
Why Mould likes it: Diageo has an enviable collection of brands and consumers often stick with a brand, even if prices rise.
Why it could offer good value: This so-called ‘pricing power’ – an ability to pass on costs – means it generates excellent margins, returns on capital and cash flow.
Current share price: £40.21.
3. HALMA
What it does: Halma owns small and medium sized firms creating life-saving technologies to tackle problems such as water pollution and chronic illness.
Why Mould likes it: Any firm that has increased its annual dividend by at least 5 per cent for 42 years running is doing something right.
Why it could offer good value: Halma has a competitive edge because of its ongoing investment and tight regulation around many of its products, protecting it from new market entrants.
Current share price: £25.32.
4. HARWORTH
What it does: Harworth is a land regeneration and property development specialist, with about 100 sites in the North of England and the Midlands.
Why Mould likes it: Its shares are already cheaper than the total value of the assets it owns.
Why it could offer good value: Any share slide would open up that discount further and make the valuation more tempting.
Current share price: £1.73.
5. SMITH & NEPHEW
What it does: It is a manufacturer of medical equipment.
Why Mould likes it: Smith & Nephew has been hit by Covid as elective surgery is postponed. But, as the impact of Covid fades, the company should benefit.
Why it could offer good value: It has also developed a promising pipeline in orthopaedics and a strong position in sports medicine and wound care, so sales could rise strongly. The shares already trade at a substantial discount to those of US and global peers.
Current share price: £12.33.
6. SSE
What it does: It is a utility provider and energy company.
Why Mould likes it: SSE is well placed to spearhead and benefit from the shift to renewable energy. It plans to fund an investment drive in renewables by selling assets and cutting its dividend for the year to March 2024. But, even with a dividend cut, the annual yield is still 3.7 per cent.
Why it could offer good value: A share price fall would increase the dividend yield, making it even more enticing for incomeminded investors.
Current share price: £18.17.