Putting Spotlight on Some Blue-Chip Stocks: Ocado, Fresnillo and Polymetal

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Putting Spotlight on Some Blue-Chip Stocks: Ocado, Fresnillo and Polymetal

 Putting Spotlight on Some Blue-Chip Stocks: Ocado, Fresnillo and Polymetal

Summary

  • Blue-chip stocks are large companies with multi-billion dollar valuations and tend to have a long history of paying rising dividends
  • Ocado Group PLC saw a growth of 27 per cent in the retail revenue for the half-year ending on 31 May 2020
  • Fresnillo PLC generated a gross profit of US$321.2 million, increasing 56.3 per cent.
  • Polymetal International PLC’s Q2 gold equivalent production (based on 120:1 Au/Ag ratio), increased by 2 per cent y-o-y to 358 Koz

Investors are always tempted to invest in blue-chip stocks, which has long been a preferred investment destination, due to fundamentally sound companies, holding excellent reputation. Let us deal the different façade of the blue-chip stock investment.

What are Blue-Chip Stocks?

Blue-chip stocks refer to companies that are strong, stable, and highly established. They are generally stocks that are established, safe, considered as the market leaders and tend to have a long history of paying rising dividends. Most of the blue-chip stocks are large companies with strong valuations that remain profitable even during recessions.

What are the Characteristics of Blue Chip Stocks?

Following are some of the key qualities that most blue-chip stocks in the UK posses.

  • Form a part of the FTSE 100 Index
  • Having a long track record of paying dividends
  • Have gone through many market recessions – and survived

Why Should an Investor Invest in Blue Chip Stocks?

  1. Solid Balance Sheets- The balance sheet illustrates how strong (or weak) the firm is with respect to assets and liabilities. Mostly, the best blue-chip stocks will have good cash flows, minimal debt levels, and plenty of income-generating assets, giving UK blue-chip stocks the best chance possible of weathering a stock market storm.
  2. Dividends- Majority of the blue-chip stocks are also dividend stocks, though not all. Considering the characteristics of a blue-chip stock, i.e., established, strong, and stable, it does make sense. It’s probably a good sign for an investor, standing the chance of making money on two fronts – capital gains and regular profit distribution.
  3. Proven Business Models- Blue chips stocks have been in the game for a long, long time, which means that their business models are proven over a sustained period.
  4. Huge Discounts Available During Market Downturns- It is true that the stock markets move in cycles. For example, when the financial crisis of 2008 came to fruition, the vast majority of FTSE 100 constituents went on a prolonged downward spiral. While arguably, some have since never recovered (in terms of returning to their pre-2008 stock price), most blue-chip stocks have.

Below we have outlined the top UK blue-chip stocks, with the highest 6 months total return.

Ocado Group PLC (6 months total return- 111.2 per cent)

Incorporated in 2009, Ocado Group PLC is an online grocery retailer, based in the United Kingdom. The activities of the company involve grocery retailing and the development, and monetization of Intellectual Property (IP) and technology used for the online retailing, logistics and delivery of grocery and consumer goods coming from UK markets.

The company saw a growth of 27 per cent in the retail revenue for the half-year ending on 31 May 2020, resulting from its ability to meet unprecedented, and sustained, demand for online grocery in the UK. The Group’s EBITDA was recorded at £19.8 million, down 36 per cent, due to the increased costs from investment in International Solutions business, offset by strong Retail performance during the current crisis. Loss before tax of £40.6 million was also incurred. The cash position of the company stood at £2.3 billion, including the £1bn capital raise after the period end.

Stock Performance

Ocado Group PLC (LON: IMB) stock last traded at GBX 2,428.00 on 21 August 2020, up by 0.41 per cent from its previous close. The company's 52 weeks low/high was reported at GBX 1,064.00/2,428.00. It was having a market capitalization (Mcap) of £18,084.99 million. The stock has delivered a YTD (Year to Date) return of + 92.77 per cent.

Fresnillo PLC (6 months total return- 82.6 per cent)

Fresnillo PLC is a holding company, engaged in the mining and beneficiation of non-ferrous minerals, and the sale of related production. The production includes primary contents such as silver, gold, lead and zinc. It has seven operating mines.

The company generated a gross profit of US$321.2 million, increasing 56.3 per cent. An increase of 232.1 per cent and 52.6 per cent respectively were recorded in the operating profit and EBITDA of US$216.9 million and US$469.9 million. The profit before income tax of US$127.9 million was recorded, which was up 136.6 per cent. The company announced an interim dividend of US$16.9 million.

Stock Performance

Fresnillo PLC (LON: FRES) stock last traded at GBX 1,234.00 on 21 August 2020, down by 0.88 per cent from its previous close. The company's 52 weeks low/high was reported at GBX 527.00/1,340.00. It was having a market capitalization (Mcap) of £9,174.33 million. The stock has delivered a YTD (Year to Date) return of +91.61 per cent.

Polymetal International PLC (6 months total return- 53.7 per cent)

Based in Cyprus, Polymetal International PLC is a precious metal mining group, having a portfolio of nine producing gold and silver mines and 3 development projects across Russia and Kazakhstan.

The Group saw a continued steady performance in Q2 2020. The Q2 gold equivalent ("GE") production (based on 120:1 Au/Ag ratio), increased by 2 per cent y-o-y to 358 Koz, because of the strong performance at Kyzyl which compensated for the planned decline at Svetloye. The Company's revenue for Q2 increased by 30 per cent y-o-y to reach US$ 641 million on the back of higher gold prices and sales volumes. The Group paid final dividends of US$197 million for FY2019.

Stock Performance

Polymetal International PLC (LON: POLY) stock last traded at GBX 1,960.50 on 21 August 2020, down by 0.31 per cent from its previous close. The company's 52 weeks low/high was reported at GBX 1,039.50/2,050.00. It was having a market capitalization (Mcap) of £9,278.03 million. The stock has delivered a YTD (Year to Date) return of +64.54 per cent.

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