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Final month, the FTSE 100 index of main British shares hit a brand new all-time excessive.
Within the weeks since then, nevertheless, it’s gone into reverse. The index is round 3% decrease than the excessive it hit final month.
Now, 3% won’t sound like a lot. However over the previous 5 years, the FTSE 100 has grown by solely 11%. Inside that context, a 3% fall in a matter of weeks is definitely fairly massive.
What’s occurring – and the way can I finest place my portfolio in response?
Lengthy, lazy summer season
I believe loads of this would possibly merely be a manifestation of the outdated inventory market adage “sell in May and go away”.
Whereas that will sound simplistic, springtime usually sees a cluster of full-year outcomes. This yr, a few of these got here in strongly and pushed up share costs.
However because the Metropolis will get quieter and ideas drift in the direction of a soothing summer season, exercise and costs within the inventory market may lose some momentum.
Valuations proceed to look low-cost
Relatively than making an attempt to time the market, the method I take is solely to search for worth always.
Whereas the FTSE 100 index appears to be cooling its ft after hitting a brand new report, that doesn’t inform me something about particular person shares inside it.
Over the previous yr, for instance, Rolls-Royce has greater than tripled. Against this, raincoat maker Burberry (LSE: BRBY) has skilled its personal patch of stormy climate and misplaced over half its worth.
I’m not shopping for the index as a complete, however reasonably I’ve a portfolio of particular person shares. So, whether or not or not the FTSE 100 is shedding momentum for the time being, I proceed to look out for what I believe might be bargains.
Looking for shares to purchase
May Burberry be simply such a discount? It has an iconic model, world fan base, premium product pricing, and a dividend yield of 6.3%.
Final month, the style home launched its full-year numbers they usually have been removed from stylish.
It held the dividend flat, which means that for now that pretty juicy yield stays. Income declined 4%, which isn’t nice however equally I don’t assume is catastrophic.
But it surely was on the backside line, not the highest line that issues grew extra alarming. Reported working revenue slid 36%. Attributable revenue fell extra, at 45%. Free money stream crashed 84%.
Slowing demand within the luxurious sector harm Burberry and its model struggled to take care of traction with fashionista buyers.
Potential FTSE 100 discount
I’m torn right here.
The yield is engaging, the model has underlying strengths even when it has been performing weakly. The corporate has plans to enhance efficiency.
Alternatively, demand on the pricy finish of the rag commerce might worsen earlier than it will get higher. This might grow to be a high-yield discount, however it could equally find yourself being a falling knife.
So, for now, I’ll carry on in search of different FSTSE 100 shares I might add to my portfolio.
