Is it time to buy the three worst-performing FTSE 100 shares of the year?

I prefer to buy FTSE 100 shares when they’re falling and therefore cheaper. But are the three I’m looking at here simply too risky?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Shot of a young Black woman doing some paperwork in a modern office

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

I like to think of myself as a contrarian investor, one who targets out-of-favour FTSE 100 stocks in the hope of buying them cheap and benefiting when they recover.

The following three UK blue-chips are the worst performers of the past 12 months. So should I buy them today?

The three biggest FTSE 100 flops are Fresnillo (LSE: FRES), Croda International (LSE: CRDA) and RS Group (LSE: RS1). I don’t hold any. What kind of contrarian am I?

Should you invest £1,000 in Glencore Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool 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 Glencore Plc made the list?

See the 6 stocks

Swimming against the tide

Fresnillo is the biggest fallout on the index over the last year, down 35.38%. Investors who bought the world’s largest silver miner haven’t exactly struck gold. The Mexico-focused miner has been hit by the resurgent peso, which smashed dollar revenues, as well as rising labour, electricity and diesel costs. First-half profits crashed 69.2% to $47.9m.

Created with Highcharts 11.4.3Fresnillo Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

What happens next largely depends on interest rates. Rocketing bond yields have increased the opportunity cost of holding gold and silver, hitting demand. In a further blow, precious metals are priced in dollars, and the resurgent greenback makes them more expensive to foreign buyers.

Given these headwinds, there’s a strong contrarian case for buying Fresnillo. But with interest rates set to stay ‘higher for longer’, I think now may be a little too soon.

Global speciality chemicals company Croda is the second worst FTSE 100 stock over 12 months falling 28.94%.

Created with Highcharts 11.4.3Croda International Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

In July, it reported a 21.9% drop in first-half sales to £880.9m, with profit before tax crashing 79.8% to £128.7m.

CEO Steve Foots pinned this on the unprecedented “speed and scale of the post-Covid stocking and subsequent destocking”. Despite falling margins, the board held the dividend at 47p, “reflecting confidence in future performance”.

Unfortunately, customers haven’t finished destocking yet, and this will weigh on second half performance. Croda is cutting costs to protect profitability and, once again, the turnaround looks set to take time. I expected a cheaper valuation than 17.4 times earnings but, like Fresnillo, I’m keeping my eye on this one. There’s an opportunity here.

They’re still making money

Shares in industrial and electronic equipment supplier RS Group are down 27.24% over the last year, due to challenging market conditions. Yet it’s hardly a disaster zone, with full-year adjusted profit before tax up 17% to £390.7m on a like-for-like basis, and the dividend hiked 16%.

Q1 revenue was “marginally softer than anticipated” due to weaker purchasing manager index (PMI) data, a soft electronics market and tough comparatives. RS Group is also at the mercy of FX movements, with every 1 cent movement in the euro having a £2.1m impact on annual adjusted profit before tax.

RS Group now looks cheap, trading at 11.37 times earnings, and is possibly the most tempting of the three. CEO Simon Bryce says it’s responding to the downturn by managing costs while continuing to make strategic investments for the future.

All three FTSE 100 underperformers offer modest dividends with Fresnillo yielding 2.58%, Croda 2.25%, and RS Group 2.83%. They’re now on my watchlist.

They all require a wider recovery in sentiment that could take time, but I buy shares with a minimum five-year view, so it’s less of an issue. With markets set for a bumpy October, I might buy them if their share prices dip, or crash, because that’s what contrarians do.


Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Croda International Plc, Fresnillo Plc, and Rs Group 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.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Rolls-Royce's Pearl 10X engine series
Investing Articles

Rolls-Royce shares have reached £10. Too late to buy?

Selling for pennies as recently as 2022, Rolls-Royce shares recently topped a tenner apiece. Our writer assesses whether he's too…

Read more »

UK coloured flags waving above large crowd on a stadium sport match.
Investing Articles

Meet the $2 stock up 366% that UK investors are piling into

UK stock investors have been snapping up this meme stock recently. Incredibly, it has more than quadrupled since June! What's…

Read more »

Middle-aged Caucasian woman deep in thought while looking out of the window
Investing Articles

Down 49%, is this well-known name the deep-value stock it seems?

Our writer has been tempted to add more B&M shares to his portfolio after a recent tumble. So what's holding…

Read more »

Abstract 3d arrows with rocket
Micro-Cap Shares

After falling 80% from a 52-week high, is this penny share a screaming buy?

This penny share company skyrocketed earlier this year, but the share price has since fallen back. Is it a new…

Read more »

British Pennies on a Pound Note
Investing Articles

This penny stock rose 49% in a year. Here’s why it may still be a terrific bargain

This penny stock has soared by 49% in 12 months -- but still sells for far less than the sum…

Read more »

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

MHA is a UK stock market success story that deserves your attention

MHA listed on the UK’s stock market in April and has performed extremely well. Dr James Fox explains why the…

Read more »

A senior man using hiking poles, on a hike on a coastal path along the coastline of Cornwall.
Investing Articles

£20,000 in savings? Here’s how a Stocks and Shares ISA could generate £621 a month of passive income – tax-free!

Christopher Ruane explains how a Stocks and Shares ISA could potentially generate sizeable long-term passive income streams from proven businesses.

Read more »

A rear view of a female in a bright yellow coat walking along the historic street known as The Shambles in York, UK which is a popular tourist destination in this Yorkshire city.
Investing Articles

Up 269% in 5 years, could the Marks and Spencer share price go even higher?

Christopher Ruane explains some of the reasons the Marks and Spencer share price has boomed in recent years -- and…

Read more »