Nothing is permanent on the Australian share market as long term investors in any of the three companies below will attest to.
Shares of Blackmores Limited (ASX: BKL), Retail Food Group Limited (ASX: RFG) and Challenger Ltd (ASX: CGF) have fallen significantly for a variety of different reasons in recent times.
The question now is: Can these former market darlings of the ASX turn their fortunes around and recover their former glory?
Blackmores
Weakness and regulatory headaches in Blackmores’ key market of China began to drag its shares down shortly after they soared to more than $200 in 2016.
Blackmores recently posted a 24% decline in full-year net profit and has said that growth is likely to be subdued, at least in the short term.
In August, the Blackmores share price briefly dipped below $65 after releasing its results. Fortunately for shareholders it has recovered somewhat, closing at $83.44 yesterday.
Still sitting more than 30% off its 12-month high, any positive news regarding an uptick in growth from Blackmores’ Chinese operations is likely to see bargain hunters swooping in to have a piece of the action.
Retail Food Group
Retail Food Group or RFG is one of the most spectacular failures of any listed company I’ve seen in my lifetime. RFG was indeed a market darling, recommended by many analysts and owned by thousands of mum and dad investors around the country.
Ever since media investigations lifted the lid on shoddy practices within their franchising businesses, it’s been one-way traffic for the RFG share price.
Management initially denied many of the allegations but as the evidence continued to build investors were bailing out in droves with the stampede for the exit causing the share price to collapse from a high of nearly $7 to just $0.30 in less than two years.
In an ambitious bid to turn things around the company has just announced a capital raising with the proceeds to be used for paying down debt.
Challenger Ltd
The Challenger share price peaked above $14 in late 2017 but has been progressively falling ever since. Slowing growth in annuity sales has turned sentiment negative and management have warned that profits could fall by close to 10% in FY20.
However, whilst the short term may not look bright, I think the long-term prospects for Challenger remain largely unchanged. The ageing population will serve as a strong tailwind in future years and governments are likely to continue to support annuity products that can lessen the reliance on pension payments in the latter stages of life.
Challenger would clearly be my pick of the three shares and I think the current share price offers good value for long term investors.
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At the time of publishing, Luke owns shares in Challenger Ltd.
