Even the world’s best investors get caught out badly now and then as tomorrow’s stock prices are impossible to know. Generally the market’s collective wisdom is strong and it prices in everything that’s known about a business historically and going forward into exisiting valuations.
The unknowns that will change estimates of future cash flows are what represent tomorrow’s prices. This is the approximate stock market theory taught by the father of valuation Benjamin Graham, who also taught Warren Buffett.
Given tomorrow’s events are a known unknown even popular shares can go backwards. While other companies’ valuations will fall simply because they’re facing multiple problems.
Keeping this in mind let’s take a look at the 10 worst mid-cap shares of 2019. According to Commsec anyway.
Source: Commsec Nov 22, 2019.
St Barbara Ltd (ASX: SBM) is a gold miner down 44% in 2019 partly on the back of it downgrading FY 2020 production guidance at its Gwalia mine from between 200,000/oz to 210,000/oz to 170,000/oz to 190,000/oz.
New Hope Corporation Ltd (ASX: NHC) has run into legal problems on the back of objections over the development of proposed coal mines in Queensland. This has hurt sentiment around the business, despite total coal production rates in Queensland and New South Wales continuing to climb. However, this didn’t offset declining coal prices over the last quarter of 2019.
Blackmores Limited (ASX: BKL) saw adjusted net profit fall 19% in FY 2019 and statutory profit fall 24%. The group blamed the weak result on regulatory changes in China where sales actually fell. This could be ominous for existing shareholders.
Coronado Global Resources Inc (ASX: CRN) has also fallen victim to falling coal prices over the last quarter of 2019. It also blamed the US/China trade war and higher operating costs for it having to downgrade calendar year 2019’s EBITDA guidance.
Whitehaven Coal Ltd (ASX: WHC) is another coal miner suffering from the steep decline in coal prices over the second half of 2019. This goes to show how miners are price-taking businesses vulnerable to falls in commodity prices.
Adelaide Brighton Ltd. (ASX: ABC) blamed weak residential and civil construction markets that slowed demand for its construction products. As a result both sales and profits fell over the first half of calendar 2019.
Yancoal Australia Ltd (ASX: YAL) is another coal miner also struggling as coal prices decline. More generally it’s no secret that increasing pressure is coming on the federal government to limit the expansion of coal mining in Australia.
Inghams Group Ltd (ASX: ING) is the poultry farmer that has been heavily short sold by investors for a couple of years. Its underlying earnings per share marginally decreased over fiscal 2019 and the stock could remain volatile.
Virgin Money UK / Clydesdale Bank (ASX: VUK) is the former Clydesdale Bank that recently merged with Virgin Money UK. Clydesdale Bank has struggled under the weight of huge regulatory fines for the mis-selling of financial products in the UK and as Brexit uncertainty hits the UK economy.
Link Administration Holdings Ltd (ASX: LNK) got hit this year after one of the flagship funds it acted as a responsible entity (RE) for in the UK got frozen over a scandal suggesting it had breached the investment guidelines the RE is supposed to enforce. This could prove a short-term issue for Link as the RE services part of its business is tiny compared to its core share administration business.
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*Extreme Opportunities returns as of June 5th 2020
Tom Richardson has no position in any of the stocks mentioned.
You can find Tom on Twitter @tommyr345
The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Link Administration Holdings Ltd. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. The Motley Fool Australia has recommended Link Administration Holdings Ltd. 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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