Nothing is permanent on the Australian share market as long term investors in any of the three companies below will attest to.
The question now is: Can these former market darlings of the ASX turn their fortunes around and recover their former glory?
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.
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.
Online Value Investing Course - FREE!
How do you value an investment? Do you really understand what you’re investing in and why?
We’ve just updated our FREE business valuation course and made it available to investors like you. Complete with models, templates and tools, simply click here to access the course.
It’s completely free!
Disclaimer and warning: The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms of Service and Financial Services Guide before using this website.
At the time of publishing, Luke owns shares in Challenger Ltd.