When FTSE stocks trend lower, it can sometimes attract attention from value buyers. Particularly when a share hits 52-week lows, it can trigger excitement that the stock could be undervalued. So when I noticed a company at 52-week lows being one of the most bought shares this week from broker AJ Bell, it naturally got me interested.
A recent dip
I’m referring to Prudential (LSE:PRU). Over the past year, the stock is down 14%. At 931p, it’s well off the 2026 high of 1,220p. Before I get to why people are suddenly buying this dip, let’s review why it’s in this position in the first place.
The biggest problem facing Prudential is uncertainty surrounding China. Although listed in London, the insurer generates its business primarily across Asia and Africa, with Hong Kong representing a particularly important market.
Investors became concerned in August following reports that Chinese authorities were enforcing a 20% personal income tax on returns from certain offshore insurance policies. This potentially makes Hong Kong insurance products less attractive to mainland Chinese customers, threatening an important source of new business for Prudential.
There have also been concerns about weaker Chinese consumer confidence, regulatory changes affecting insurance distribution and the pace of growth across the business.
All of that has weighed on the share price into the autumn.
The buying buzz
I believe investors are buying the stock now mainly because they think it looks undervalued given the strength of Prudential’s underlying business.
First-half adjusted operating profit increased 9% to $1.81bn, while ‘operating free surplus’ (similar to free cash flow) generation rose 15% to $1.79bn. Adjusted earnings per share also climbed 17%. These are hardly the figures I’d expect from a business experiencing serious operational difficulties with a share price at 52-week lows.
Importantly, management remains confident of achieving double-digit growth in new business profit, operating free surplus and adjusted earnings per share for 2026.
Another attraction is the company’s shareholder returns. Prudential increased its interim dividend by 15% and expanded its planned 2026 share buyback programme to approximately $1.5bn. So for buyers right now, even if the stock hasn’t hit the lowest level for the year, there’s the potential to earn income whilst waiting for a turnaround.
An uncertain market
With a price-to-earnings ratio of 10.93, Prudential is below the index average, and so I can see the reason why some think it’s cheap. Of course, a cheap-looking share price doesn’t automatically mean a bargain.
The biggest risk is that China’s tighter enforcement of offshore tax rules causes a sustained reduction in demand for Hong Kong insurance products. Continued weakness in the Chinese economy could also undermine customer confidence.
From my perspective, I think it’s a little bit early to jump in and buy the stock. However, that’s coming from someone who is more of a low-risk investor. For those who have a higher risk tolerance, buying now could result in generous returns if the stock rallies back in the coming months.
Should you invest £5,000 in Prudential Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Prudential Plc made the list?
Jon Smith has no positions in the shares mentioned.
This story originally appeared on Motley Fool
