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Prudential (PRU) 696.5p

The UK insurer unveiled a weak sales performance in a trading update in October. While overseas operations registered reasonable growth, sales in the UK were poor. Prudential’s shares are almost 13% up since the year low at 618p but Christian Tegllund Blaabjerg, market strategist at Saxo Bank, believes fundamental ratios point towards a substantial de-rating. He says that the stock has a high beta coefficient (a measure of a stock’s volatility in relation to the wider market), and that the shares trade at a premium-to-book value. Both these make them vulnerable to a further multiple contraction in the short term. Other risks are the company’s exposure to volatile BBB-rated US corporate bonds and a downturn in UK savings in the case of a recession. Go short placing a stop loss at 732p.

ACTION: SELL Prudential • Target 627p • Stop Loss 732p

TIME TARGET: 4 WEEKS