It seems as though the big bad bogeyman of China has been made the scapegoat for the global rout in stocks including the FTSE 100.
Well that’s nice and indeed overnight Asian shares have continued their slide influenced by China’s factory output contracting at the fastest rate in three years.
Economic pundits have touted this as an indicator of China’s slowing growth.
Chinese stocks have lost 40% of their value since June of this year.
Indeed there seems to be a lot of negative sentiment building up with chartists in the US highlighting ‘death cross’ patterns (when the 50 day moving average crosses the 200 day moving average) across small, mid and large cap stocks.
In the UK the FTSE 100 has lead the way with this chart pattern with the FTSE 250 not far behind:
The FTSE 100
As mentioned in the most recent edition of the newsletter not all of my capital is tied up in stocks which means this new bout of falling share prices represents an opportunity to buy the right stocks at the right price.
Bargain Hunting In The FTSE 100
Running Benjamin Graham’s ‘Relativeley Unpopular Large Company‘ screen through ADVFN this morning has yielded – unsurprisingly – a mining and property centric list of stocks that could merit further scrutiny by the large cap investor.
One such stock that has not appeared on the screen (screens are good but not always) is Royal Dutch Shell (LSE: RDSA):
The thing I like about this chart is that it shows RDSA nearing support levels at multi-year lows.
Walter Schloss liked the same thing because it decreases the risk of capital on individual stocks when you buy them at lows.
the proposed BG deal addresses one of its key concerns over the company, which is a lack of growth in volumes and cash flow, and management’s determination to use the combination to drive a sharp improvement in business performance across the organisation is becoming clearer
Here’s are 5 of RDSA’s key valuation metrics:
- A PE ratio of 10.5
- a dividend yield of over 7%
- a price to net tangible asset value of 0.60
- a debt to equity ratio excluding intangibles of 0.57
- a current ratio of 1.35
Not bad considering the size and scope of RDSA’s operations although the safety of the dividend has been questioned in the financial press and the PE Ratio is high relative to it’s past average.
I’m not buying this stock as of yet but it is certainly one to watch and a good example of what can happen when a FTSE 100 stocks’ share price is falling.
Charts courtesy of Yahoo! Finance