The resource rout continued today, Fools, with the S&P/ASX 200 (INDEXASX: XJO) losing another 2% to 4,931 points as resource stocks and a major insurer were pummelled by a falling oil price and an adverse market update.
Here’s what you need to know about today’s falls at:
Suncorp Group Ltd (ASX: SUN) shares fell 8.9% to $11.89 after the insurer announced it was likely to take a significant hit on its profit margins thanks to heavy competition, high claims and a lower Australian dollar. As I wrote in this article, both Suncorp and Insurance Australia Group Ltd (ASX: IAG) are unlikely to deliver strong growth going forwards as they are constrained by the vagaries of the ANZ market and economy.
I would not buy shares in either insurer today.
Shares in tech start-up Reffind Ltd (ASX: RFN) fell 4% to $0.55 in continued volatility as investors struggle to value the company. Other similar stocks such as iSignthis Ltd (ASX: ISX) also fell, with iSignthis losing 8% to $0.275. These businesses are difficult to value in the early stage of their life as there is much uncertainty about the value of their offering and the likelihood of growing revenues.
However, I do own a tiny parcel of shares in Reffind, and today’s prices are lower than what I paid which has me considering a potential top-up.
Liquefied Natural Gas Ltd (ASX: LNG) was smashed down 10% to $0.89 after the value of oil fell to a six-year low overnight, prompting another sell-off of resource stocks. Santos Ltd (ASX: WPL), Oil Search Limited (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL) lost 5%, 5%, and 2% respectively.
Investors are likely to remain nervous for some time with the prospect of the weekend’s resolutions on climate change expected to accelerate the transition away from fossil fuels.
Finally, service company Worleyparsons Limited (ASX: WOR) lost 8.6% to $4.22, despite a positive announcement regarding an A$120m contract win in the Middle East. Worleyparsons has been savagely sold off in the past year as plummeting resource prices have prompted companies to slash capital expenditure – Worley’s main source of income.
Budgets are still tightening across the industry, and Worleyparsons’ profit margins could tighten further. As a result, the company is unlikely to be an attractive investment, despite trading on a Price to Earnings (P/E) ratio of just 5.
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Motley Fool contributor Sean O'Neill owns shares of Reffind Ltd. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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