A big warning indicator for luckless shareholders

by Lee Wild from interactive investor |

Among stocks struggling at the moment, some are in freefall. Here is how to spot them.

There are plenty of company shares in freefall at the moment, and investors might be easily tempted by prices not seen for many years. Afterall, Warren Buffett did say “be fearful when others are greedy and greedy when others are fearful”. 

But there is another City saying about “catching a falling knife”. Investors can get caught out buying too early, left for long periods with stocks that just keep falling way below your entry price. 

Of course, that happens to every investor during their career, professional or DIY, and there are strategies one can employ to mitigate market volatility and the risk of jumping the gun on investment acquisitions. 

In a recent exclusive interview with interactive investor, Keith Ashworth-Lord, who runs the Sanford Deland UK Buffettology fund, talked about his 'survival kit' for bear markets. You can watch the video and read the transcript here:

And other well-known fund managers like Nick Train, who we also interviewed at length just before the market crash, maintain that you should buy good quality companies, perhaps those that make a product that literally tastes good, or that inform or entertain. “Invest in businesses that do well when stock markets do well. Because, over time, believe me, stock markets will do well,” Nick told us.

But it may take time before a stock reaches its nadir, and it is impossible to be sure with any certainty that, if you buy a stock now, it will begin to rise immediately. It might require patience, and quite a lot of it given current circumstances leave even the medical experts, and certainly the economists, unclear about the eventual scale of the inevitable recession we face.

And this brings me to the purpose of the article, which is to highlight the stocks in freefall and that have possibly not yet finished falling. 

The best approach is to track shares currently hitting a 52-week low. It is a big warning indicator that might be used as a list of stocks for an investor’s watchlist, or by existing shareholders that things might get worse before they get better.

And plenty of stocks from blue-chips to small-caps made a 52-week low on Thursday, among them eight FTSE 100 stocks (see table below), all household names and all facing a crisis during the pandemic. Thirteen FTSE All Share stocks (excluding FTSE 100) did the same. For the AIM market it was 38, many of them real tiddlers worth £10 million or less.

Prices have improved slightly on Friday, but the stocks in these lists are the ones that are most at risk right now. This might be the bottom for some of them, others may have further to fall. 

FTSE 100 stocks at or near a 52-week low

   Company       Ticker    Days since 52-week low Share price (p) Share price decline in 2020 (%)
   BT       BT.A       1       107.4       -44.2   
   International  Consolidated Airlines       IAG       1       166.7       -73.2   
   Land Securities       LAND       1       525.9       -46.9   
   Lloyds   Banking Group       LLOY       1       28.6       -54.4   
   Pearson       PSON       1       427.0       -32.9   
   Rolls-Royce       RR.       1       243.0       -64.4   
   Royal   Bank of Scotland       RBS       1       104.8       -56.4   
   Standard   Chartered       STAN       1       385.8       -45.9   
   Source:   SharePad as at midday 15 May 2020   

FTSE All-Share stocks at or near a 52-week low
 

   Company       Ticker    Days since 52-week low Share price (p) Share price decline in 2020 (%)
   Custodian   REIT       CREI       0       78.9       -31.6   
   Renewi       RWI       0       20.9       -43.0   
   Aston  Martin Lagonda       AML       1       30.7       -79.2   
   De La   Rue       DLAR       1       47.0       -67.0   
   Hammerson       HMSO       1       43.6       -84.9   
   Hyve   Group       HYVE       1       12.4       -87.3   
   Lamprell       LAM       1       7.0       -78.1   
   Metro   Bank       MTRO       1       72.0       -64.3   
   NewRiver   REIT       NRR       1       50.1       -72.8   
   RDI REIT       RDI       1       46.0       -58.9   
   Schroder   REIT       SREI       1       31.1       -43.9   
   Shaftesbury       SHB       1       497.5       -47.4   
   Stagecoach       SGC       1       53.7       -66.5   
   Source:   SharePad as at midday 15 May 2020   

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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