viewCarnival PLC

Nowhere to run, nowhere to hide (except maybe Ocado and the utilities)

Just one FTSE 100 stock has increased in share price since the coronavirus outbreak started to get out of hand in Italy. Hardest hit have been travel-related stocks.


The 2019 stock market collapse in London had two big tipping points: 21 February when the FTSE 100 was at around 7,400 and 4 March, when it was at 6,815.

The first date marked the point at which the coronavirus (COVID-19) outbreak started to get out of hand in Italy; the second date marks the point at which UK investors started to realise it could happen here.

Since 21 February, the real heavy losers have been travel-related stocks.

Travel unravels

Carnival PLC (LON:CCL), the operator of “floating Petri dishes”, has been the hardest hit of the Footsie stocks, shedding 68% of its value in just over a month but airline stocks International Consolidated Airlines (LON:IAG), which owns British Airways, and easyJet PLC (LON:EZJ), which seems to be picking up public relations tips from Ryanair, are not far behind with losses of 67% and 64% respectively.

The dependency on the aerospace sector has been a burden for Melrose Industries PLC (LON:MRS), which owns automotive engineer GKN, and for Meggitt PLC (LON:MGGT), which makes equipment and systems for the aerospace and defence industries; the former is off 61% over the last month and the latter is down by 61%; in comparison, the 46% plunge suffered by Rolls-Royce Group PLC (LON:RR.) seems relatively mild.

As global stock markets have tanked, so have the share prices of asset managers. Intermediate Capital Group PLC (LON:ICP) has been punished most severely, with its share price down 61% since 21 February.

The likes of insurance companies such as Legal & General Group PLC (LON:LGEN), down 51%, own a shed-load of shares and are also presumably facing a tsunami of coronavirus-lockdown-related insurance claims.

Media companies have also got it in the neck; broadcaster ITV PLC (LON:ITV) and advertising agency WPP PLC (LON:WPP) have tanked 56% and 48% respectively as advertisers slash their advertising budgets while events organiser Informa PLC (LON:INF), down 47%, might have to go down the virtual reality route if it wants to hold any events for the foreseeable future.

Housebuilders on shaky ground

You can tell the housebuilders are struggling because they are suspending their dividends left, right and centre; you’ll know they are really struggling when some of them (not all of them) stop paying out directors obscene amounts for shooting fish in a barrel.

“Redrow’s decision to cancel its interim dividend means the FTSE 250 firm is the third housebuilder to scale back its plans to return cash to shareholders, following Berkeley’s scaling back of its special dividends and buybacks and Crest Nicholson’s cancellation of its final dividend for 2019,” said Russ Mould, AJ Bell’s Investment Director.

“The move saves Redrow £37 million and investors do not seem surprised, given that the shares are up today. Before the announcement the stock was, on paper at least, offering a forward yield of 9%, a figure which has now proved too good to be true,” Mould said.

Yields that are too good to be true might be one reason why Redrow’s sector peers have been under the cosh; Barratt Developments PLC (LON:BDEV) and Taylor Wimpey PLC (TW,) are both down 53% since 21 February and Persimmon PLC (LON:PSN) has seen its share price halve.

The story of O and momentum

It’s an ill wind that blows nobody any good, but excluding NMC Health PLC (LON:NMC), whose shares are suspended, there is just one FTSE 100 stock that has risen since 21 February: Ocado Group PLC (LON:OCDO), which is up 5.6% on the back of demand for its online grocery delivery services.

If we change the date to the other tipping point, 4 March, then precious metals miner Fresnillo Plc (LON:FRES) joins Ocado in credit with a 10% rise. The moral is to invest in Footsie stocks that end in “O” (Spirax-Sarco, Tesco, Rio Tinto and Segro have all outperformed).

Looking at just this month, if you compare the percentage changes on FTSE 100 stocks between 2 March and 12 March to the changes between 13 March and last night’s close, the stocks showing the most alarming comparisons are still largely aerospace-related stocks.

Meggitt share price

Meggitt's recent share price performance

IAG (an increase of 19.5 percentage points in its percentage falls over the two periods - in other words, it has been falling faster recently), Meggitt (+13.8 percentage points), easyJet (+9.0 percentage points) and Melrose (+7.0 percentage points) are all in the top five (or bottom five, if you prefer) with property listings website Rightmove PLC (LON:RMV) squeezing in at number four (+8.9 percentage point increase).

It’s not a measurement that has any technical analyst I know hitting the ‘sell’ button but then again, I don’t know any technical analysts. It does suggest these stocks are now bleeding even more profusely than they once were and could soon be on life support (but maybe not Rightmove, which is a capital-light business with astonishing margins although this crisis might threaten the juicy mark-up it gets for being a glorified newsagent's shop window).

In contrast, the likes of mining giant BHP Group PLC (LON:BHP), where the difference in percentage change movements is negative at 40 percentage points (i.e. it is not falling so fast now); Royal Dutch Shell PLC (LON:RDSB), -34 percentage points; and Aveva Group PLC (LON:AVV), -28 percentage points, suggests energy-related stocks are getting over the double-whammy of a sharp downturn in economic activity and the fall-out between OPEC+ members Saudi Arabia and Russia.

The picture is not looking so bad either for utilities providers Centrica PLC (LON:CNA) and BT Group PLC (LON:BT.A) either, where the difference in percentage changes over the periods has improved by 31 PPs for the former and by 28 PPs for the latter.

Sometimes the old defensive standbys are still the stocks investors … er … stand by in a crisis.


Quick facts: Carnival PLC

Price: 1339.5 GBX

Market: LSE
Market Cap: £11.82 billion

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