The FTSE 100 is down 3.5% this month as UK shares suffer losses due to market uncertainty. But as the Footsie had such a great start to the year, the minor dip has only brought it to a six-week low.
As a value investor, I’m more interested in high-quality shares that are at their lowest in years – 30% to 50% down from their 52-week high.
I’ve found three that fit the bill but I’m interested in just one of them.
JD Sports Fashion
It’s JD Sports (LSE: JD.), a leading British multinational retailer specialising in sports fashion. It has a significant global presence and historically strong performance. Revenue was over £10bn in the latest results, with almost £1bn profit and a decent 9.3% operating margin.
So why is the stock down 55% from its 52-week high?
The business struggled during the 2024 holiday season, reporting a 1.5% decline in like-for-like revenues across November and December. A “challenging and volatile market” with increased promotional activity. Consequently, the company downgraded its full-year pre-tax profit forecast by almost 10%, to between £915m and £935m.
Will it recover?
Through it all, JD still focused on aggressive expansion, acquiring US company Hibbett for $1bn. This strategic move is part of a plan to increase its global market share, which could equate to long-term growth – so there’s a decent chance and I’m considering it.
Persimmon
Persimmon (LSE: PSN) is one of the UK’s leading housebuilders. For FY24, it reported a 7% increase in completions, delivering 10,664 more new homes than in 2023. Group revenue increased 6% and underlying operating profit rose 14%.
So why is it down 32.4% from its 52-week high?
Stubborn inflation remains the key issue affecting the UK property sector, affecting share prices across the board.
Add to this increasing national insurance contributions which could amount to £15m in expenses. Both these issues weigh on investor sentiment.
Will this one recover?
Looking ahead, Persimmon plans to build between 11,000 and 11,500 homes in 2025. CEO Dean Finch has called on the UK government to reintroduce support for first-time buyers to meet the national target of 1.5m new homes by 2029. He suggested a shared equity scheme to assist buyers with deposits — a significant barrier to home ownership.
However, inflation will likely be the deciding factor for its recovery. For now, it’s too early for me to tell.
Berkeley Group
Berkeley Group (LSE: BKG) focuses on residential developments in London and the South East. For the half-year ending October 2024, the company reported a 7.7% decline in pre-tax profits to £275.1m, down from £298m the previous year. Despite this, there has been a slight increase in sales recently, indicating a potential market recovery.
So why is the stock down 35.6% from its 52-week high?
CEO Rob Perrins has pinned the limited supply of new homes to industry challenges, like stringent planning regulations and elevated mortgage rates.
As with Persimmon, inflation is a big risk along with potential new tax levies.
Can it recover?
Berkeley is acquiring new sites for the first time since early 2022, signaling confidence in a market rebound. It plans to invest £2.5bn in land under a new 10-year strategy, which sounds promising.
However, stubborn inflation will again be the deciding factor, so for now, I can’t say for sure.
