As we speak I’m taking a look at one FTSE 100 share that abruptly dropped to a four-month low up to now two weeks.

Investor lore proclaims that ‘time out there’ beats ‘timing the market’. The unique quote implies that attempting to catch worth highs and lows is much less efficient than merely remaining invested for the lengthy haul. 

Whereas which may be true, it’s all the time tempting to attempt to reel in just a few low cost shares whereas the fishing is nice.

So what’s the deal?

M&G (LSE:MNG) shares crashed 16% over the previous few weeks regardless of the corporate posting optimistic outcomes on 21 March this yr. The spectacular 2023 full-year report included web shopper inflows as much as £1.1bn from £0.2bn final yr, to not point out a 28% rise in adjusted working revenue earlier than tax. 

So why the sudden hunch? 

Positive, the £4.8bn funding supervisor barely bothered to lift its dividend yield however at 9.77%, can shareholders actually complain? The corporate remains to be on monitor to pay a dividend of 13.2p per share on 9 Could, 2024. That’s solely a 0.2p lower from April 2023 – hardly a trigger for concern. 

The dip might be a lagging fallout from the suspension of its property portfolio in October final yr, funds from which have been deliberate for distribution this February. However on the time the information broke, the share worth solely suffered a minor setback and recovered inside weeks. The sudden decline now might be defined if there have been an sudden delay in fund distribution — or because of the distribution itself.

Can the charts reveal something?

Utilizing a reduced money stream mannequin, analysts estimate the £1.97 shares to be buying and selling at 48% under honest worth. However when in comparison with web earnings, the worth appears precisely valued. M&G’s web earnings has declined 72% over the previous three-and-a-half years, leaving it with a trailing price-to-earnings (P/E) ratio of 16.25 (barely above the trade common however not notably excessive for the monetary providers sector).

worth forecasts from a number of analysts, consensus estimates are for a 17% improve within the coming 12 months. Contemplating how comparatively low the worth is now, I might say that appears about proper. It might be mimicking an identical worth motion sample that occurred again in early 2023. Final yr, a giant dip in March noticed the worth regain 23.35% within the following six weeks.

Having fallen to twenty, M&G’s relative power index (RSI) is now the bottom it’s been in over 18 months — often a precursor to a worth reversal. In September 2022, after the RSI dipped under 19, the worth rose 44% within the following six months. RSI seldom stays under 30 for lengthy, often rising together with the worth.

General, I can’t uncover any basic cause for the worth decline. If it’s a one-off dip because of the property fund distribution, then it’s unlikely to fall additional. And based on the charts, the worth may begin rising once more within the coming days.

M&G stays a stable firm with an incredible dividend. In the long term, I don’t assume this dip is just too critical. However at this level, I might preserve my eye on the shares to make certain the sell-off has ended earlier than shopping for.