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Why Medibank Private Ltd is among 2 fallen stars at 52-week lows

The local benchmark share index the S&P/ ASX200 (ASX: XJO) is now down around 10% from highs set back just a few months ago in August 2018 as investors worry about the effects of Australia’s weakening GDP growth and house prices. While abroad the US / China trade dispute and Brexit problem are also leading investors to hit the sell button.

In fact three former investor favourites are now stuck at 52-week lows. If a stock breaks a 52-week low many analysts consider it a bearish technical indicator as selling pressure can build as many shareholders choose to take a loss rather than more paper losses.

So let’s take a look at three fallen stars and consider which way next for them.

The Medibank Private Ltd (ASX: MPL) share price is now down 24% in 2018 and hit a 52-week low of $2.36 today. That’s only marginally above its November 2014 listing price of $2.15 per share, which means dividends have contributed the bulk of some disappointing returns for subscribers to its much hyped initial public offering.

Medibank shares are under pressure as its warned that policy lapses are still higher than expected, while fewer Australians than hoped for are taking up private health insurance policies. This is potentially because weak wages growth means a lot of Australians are still happy to take their chances on the free or discounted public health sector.

On top of this worse news came in November 2018 when the insurer revealed it had lost a contract with the Australian Defence Force worth $30 million in operating profit per year.

The Aristocrat Leisure Limited (ASX: AAD) share price hit a low of $21.98 today after the electronic and digital gaming or ‘pokie’ machine manufacturer and distributor posted weaker-than-expected financial results for the full year ending 30 September 2018. For the year Aristocrat reported a profit of $616 million on revenue of $3,624 million. The profit and revenue were up 25% and 48% respectively.

Aristocrat also forecast another year of growth in its fiscal year 2019, however, it stated that much of the growth would come in the second half due to the timing of the product releases. Aristocrat now trades on 23x trailing earnings per share of 96.5 cents.

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 Scott Phillips.

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