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Another big cap FTSE 100 stocks attract more attention if the company is believed to be undervalued. This makes it somewhat difficult to make a profit, as it is unlikely that there will be a major cut-off for a multi-billion pound market company. But if I look at the track record of other small firms, I believe I can find value stocks that can bring me good results.
Problems abroad
Another one I saw was this PZ Cussons (LSE:PZC). I have a feeling this has been under the radar for a few months, but I stumbled onto my screen earlier this week following a sharp 15% drop on Wednesday (September 18). This was due to the release of disappointing financial results for the entire year.
However, the main factor among the results that caused the 29.7% drop in adjusted profit before tax was the situation in Africa. PZ Cussons works there and is paid in local currency. But if it is devalued, it can cause conflicting results when converted back to British pounds. This was accompanied by a 57% devaluation of the Nigerian naira during the reporting period.
The rate of fall means that the stock has almost halved in value over the past year. I think this is extreme, especially because I believe that Africa's problems can be solved. PZ Cussons is already in talks about selling its African operations. In addition, it is taking steps to try to deal more with US dollars in countries, reducing the volatility of its currency.
Of course, the risk is that it can't sell the partition quickly and we get more downgrades next year. This will have a negative impact on financial results as well. But at its core, PZ Cussons is a profitable business with a long history of being so.
Now is the time
Another company is Swiss Group watch (LSE:WOSG). I will admit that earlier this year I wrote about how I would run after it lost 37% in a day back in January. The stock is still down 33% from last year, but I feel the situation has turned.
The drop came after the business issued a full-year profit warning following a disappointing holiday trading season. At the time, I was pessimistic about the UK economy as a whole, with high inflation and no economic growth. So, why would a top watchmaker do well?
Fast forward to today and the UK is in much better shape. Interest rates have started to fall, inflation is close to the 2% target and consumer sentiment is slightly stronger. Business has heard this, with an update earlier this month saying so “We have seen continued stabilization of the UK market for both luxury watches and jewellery”.
Yet the share price has risen by just 4% in the past six months. I feel there is good value here. It gives me a way to make a play for the UK economy doing well in the next year. My biggest risk is if we get some kind of inflation or economic shock that causes consumer spending to drop.
I like both stocks and have them on my watch list to buy when I have some spare cash.
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