Down 20% in November! Are these now the 2 best stocks to buy in December?
Sometimes the best stocks to buy are the ones having the worst time. Iâm talking about solid companies whose share prices have been thumped, offering a chance to get in at a lower level. These two FTSE 100 stocks slumped 20% in November. Does this make them screaming bargains?
Rightmove shares crumble
Shares in property portal Rightmove (LSE: RMV) crashed by a quarter on 7 November after management pledged to make artificial intelligence âcentral to all that we doâ. The board’s timing was unlucky, coming in the middle of a wider AI panic that knocked investor confidence across the market. The Rightmove share price is down 15% over the year.
There were other issues. Underlying operating profit growth is now expected to land between 3% and 5%, down from 9% in the first half. Concerns over housing market health didnât help, and I’m wondering if the Budget ‘mansion tax’ is casting a shadow.
Broker RBC Capital called the sell-off an “overreaction”, saying the underlying business isnât broken and that AI could strengthen it over time. I see the logic, but the valuation isnât cheap with a price-to-earnings ratio of around 21. So no, not a screaming buy in my opinion. The trailing yield is a modest 1.8%. Thereâs also talk of people browsing for homes on AI platforms in future, which could change the game.
Another cloud appeared on 13 November when Rightmove said it may face a legal claim over the cost of its listing fees, with reports suggesting thousands of estate agents may seek up to £1bn in damages. Recoveries after a fall this steep tend to take time. I’ll watch, but won’t consider buying right now.
Auto Trader crashes too
Shares in Auto Trader Group (LSE: AUTO) also slumped despite the company reporting a 5% rise in first-half revenue to £296.3m on 6 November, and talking up the outlook for the new and used car markets, boosted by a new grant for electric vehicle (EV) buyers. Like Rightmove, it also flagged a strong pipeline of AI tools designed to help its customers work more efficiently.
Yet the Auto Trader share price went into a sharp reverse soon after. It’s now down 25% over 12 months. Again, the Budget may have played a part, as a new pay-per-mile charge for EVs and proposed fuel duty increases may deter buyers.
Auto Trader has also run into trouble with some car dealers, whoâve threatened to cancel or downgrade their listings caiming its new Deal Builder product has cut buyer leads.
Like Rightmove, Auto Trader remains the UKâs dominant vehicle marketplace. That gives it pricing power and enviable margins of more than 60%. It also holds net cash of £11.8m. Again, this one doesn’t scream ‘buy me’. The P/E sits around 20 with a modest trailing yield of 1.67%.
I can see why both shares have been hit, but I also think the reaction looks a little overdone. Auto Trader also looks tempting, but investors should explore further before they consider buying. I can see more exciting stocks on the FTSE 100 today.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Auto Trader Group Plc and Rightmove 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.
