This FTSE 250 stock just fell 11% to 52-week lows! Time to consider buying?

Jon Smith offers his opinion on the trading update from Jupiter Fund Management and why it has sparked a fall in the FTSE 250 stock.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Frustrated young white male looking disconsolate while sat on his sofa holding a beer

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

The biggest loser in the FTSE 250 index so far today (17 October) is Jupiter Fund Management (LSE:JUP). The stock is down 11%, hitting fresh 52-week lows at 76.15p along the way.

This ties in with a just-released Q3 trading update from the firm. Could this simply be some panic-selling, or is this something to stay away from?

Details of the report

One of the key metrics the businesses uses to judge success is the assets under management (AUM). If investors decide to park money with the firm, this is flagged as an inflow. This is good because it shows confidence in the fund managers. It also allows Jupiter to make more money, because it charges fees based on the amount of assets it manages.

Should you invest £1,000 in Jupiter right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Jupiter made the list?

See the 6 stocks

For Q3, AUM dropped by £1bn to £50.8bn. A good amount of this outflow was by retail clients, spooked by the sharp moves in the bond markets.

The report spoke of how “macro-economic uncertainty” was continuing to weigh on investors minds.

It did reaffirm expectations for the full-year of only having “modest outflows”, but this is a rather vague statement.

A large move lower

I believe part of the reason for the sharp drop in the share price is due to the difference in tone from the half-year report. If we rewind back to the end of July, the report was upbeat.

Underlying profit before tax was £46.4m, up from the £29.7m from H1 2022. It declared an ordinary dividend of 3.5p and a special dividend of 2.9p.

Of course, over the past couple of months the uncertainty with interest rates and inflation has remained. This has weighed on investors and so I think some were anticipating a slightly disappointing trading update. But it’s clear from the size of the fall that this was worse than investors were expecting.

Assessing the current value

The fall has got me focused on two points. The first is the dividend yield. Given that there was no change in the Q3 statement on dividend payments, the lower share price has acted to push up the dividend yield.

The yield is now 10.84%, making it one of the highest in the FTSE 250. Granted, there’s a risk that the dividend could be paused if the business continues to lose assets. But for the moment I don’t think this is a realistic possibility.

The other angle is the fall in the price-to-earnings (P/E) ratio. Jupiter now has a P/E ratio of 7.73, below the figure of 10 that I use as a fair value number. This could indicate that the stock is becoming undervalued and oversold.

On balance, I do think the reaction in the stock today isn’t justified. The update wasn’t great, but I don’t think the business is in a seriously bad place going forward.

On that basis I think investors should considering adding the stock to a portfolio.

Created with Highcharts 11.4.3Jupiter Fund Management Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

But here’s another bargain investment that looks absurdly dirt-cheap:

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Jupiter Fund Management Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing For Beginners

Man hanging in the balance over a log at seaside in Scotland
Investing Articles

Start investing this summer with a spare £250? Here’s how!

Christopher Ruane explains how an investor with a few hundred pounds to spare and no prior experience could look to…

Read more »

ISA Individual Savings Account
Investing Articles

£20,000 invested in a Stocks and Shares ISA 10 years ago could now be worth…

Stocks and Shares ISA investors have earned tremendous returns in the last decade, but just how much money has been…

Read more »

Mature people enjoying time together during road trip
Investing Articles

How to take an empty ISA and transform it into a potential £50,000 second income

A key requirement of reaching financial freedom is earning a second income. And the stock market provides a way to…

Read more »

Man hanging in the balance over a log at seaside in Scotland
Investing Articles

How much do you need to invest in the stock market to quit work and live off dividends?

Quitting a nine-to-five job and living off dividends from the stock market sounds like a pie-in-the-sky idea to many. But…

Read more »

UK financial background: share prices and stock graph overlaid on an image of the Union Jack
Investing Articles

Prediction: this UK share could outperform Rolls-Royce between now and 2030!

Rolls-Royce has been on a phenomenal run, but over the next five years, another aerospace business could potentially deliver far…

Read more »

A senior man using hiking poles, on a hike on a coastal path along the coastline of Cornwall.
Investing Articles

How much do you need in an ISA to aim for a £1,000 monthly passive income?

Discover how to start building long-term passive income in an ISA with compounding and smart investing to speed up the…

Read more »

Woman riding her old fashioned bicycle along the Beach Esplanade at Aberdeen, Scotland.
Investing Articles

How much should a 45-year-old put in a SIPP to earn monthly passive income of £1,000?

From a financial perspective, a Self-Invested Personal Pension (SIPP) can help provide a comfortable retirement. But what if someone starts…

Read more »

Businessman with tablet, waiting at the train station platform
Investing Articles

Rio Tinto shares: here’s the latest dividend and share price forecast

Rio Tinto shares have fallen sharply since last summer. But could the FTSE 100 mining giant be about to rebound?…

Read more »