I’m focusing on the investment potential of Interserve plc (LON:IRV) (IRV.L), Capita PLC (LON:CPI) (CPI.L), Petrofac Limited (LON:PFC) (PFC.L) and Provident Financial plc (LON:PFG) (PFG.L). Am I right to avoid them at the moment?
Petrofac would normally be a stock I’m bullish about. The company could benefit from an increasing oil price through higher activity levels across the oil and gas industry. Further, the company seems to be relatively cheap and may deliver improving underlying performance.
However, with an SFO investigation ongoing, I feel that it faces an uncertain future. Therefore, Petrofac remains a stock that I feel is too risky for me to buy at the moment.
Capita is undergoing a major change that in my view is long overdue. I feel the company has gradually become inefficient as it has expanded into new areas.
Under its new management team, it is seeking to make asset disposals and concentrate on core areas. They could mean that the company is able to deliver improved performance. But at the moment, I’m content just watching Capita rather than buying it for my ISA.
Provident Financial’s recent update showed that the company is making good progress with its turnaround in my view. Investors certainly thought so, with the company’s stock price soaring in the aftermath of the release.
However, with an FCA investigation ongoing and potential challenges in its home credit division, I feel there may be better places within the financial services sector for my money at the moment. Further, I do not feel that Provident Financial’s valuation is appealing enough given what I view as an uncertain future.
Interserve is a stock I have followed for many years. In fact, I used to own it many years ago, and it performed relatively well for me. I have contemplated buying it following its recent difficulties, but have always held off due to its balance sheet.
I feel we are at a turning point in global monetary policy. Interest rate rises could become ‘the norm’ in future years, and highly-indebted companies could suffer. Therefore, with other companies having what I view as stronger balance sheets, I’m not looking to buy Interserve at the moment.