Avoid these FTSE 100 horror shows on Friday the 13th

Royston Wild looks at three Footsie giants with shocking investment outlooks.

| 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.

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

Investor appetite for Next (LSE: NXT) headed through the floor again last week following the firm’s latest terror-filled trading update. The stock headed to levels not seen since January 2013, and I believe further weakness is likely to transpire as we head through 2017.

The retailer expects conditions to become a lot tougher from this year. Next advised that “the fact that sales continued to decline in quarter four, beyond the anniversary of the start of the slowdown in November 2015, means that we expect the cyclical slowdown in spending on clothing and footwear to continue into next year.”

The business is likely to struggle shifting its clobber as competition increases on the high street and in cyberspace. And Next may be forced to reduce the price tags on its full-price items to stop sales falling off a cliff.

Should you invest £1,000 in Lloyds Banking Group 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 Lloyds Banking Group made the list?

See the 6 stocks

With sterling pressures also likely to raise costs in the months ahead, Next is expected to record earnings dips of 2% and 5% in the periods to January 2017 and 2018 respectively. But I reckon these forecasts are in severe danger of painful downgrades, making cheap P/E ratios of 9.3 times and 9.8 times somewhat redundant.  

Bank in bother

I also believe share pickers should steer clear of Standard Chartered (LSE: STAN) as macroeconomic turbulence in emerging regions looks set to persist.

The banking giant emerged as one of the FTSE 100’s stronger performers during the latter half of 2016 as a safe haven for those fearing the implications of Brexit closer to home. But the ongoing troubles in StanChart’s Asian marketplaces look set to continue as more Federal Rate hikes appear on the horizon, a situation that should see the dollar gain further ground.

The bank is already struggling to get to grips with tough competition and broader economic troubles in these regions, and revenues dipped 6% during July and September. And Standard Chartered continues to desperately restructure in response to these troubles, and announced plans to spin off its retail operations in Thailand at the end of December.

With concerns also persisting over the health of its balance sheet, not to mention the prospect of even more heavy regulatory fines, I reckon Standard Chartered is a risk too far at present, particularly given its elevated P/E ratio of 18 times for 2017.

Brexit problems

The prospect of severe economic weakness in the UK as difficult Brexit negotiations continue could also make Lloyds (LSE: LLOY) a blood-curdling stock pick in 2017.

While economic indicators since June’s EU referendum have been much better than expected, a steady rise of inflation and a weakening labour market provide reasons to be concerned for the months ahead. And the Bank of England looks likely to keep interest rates locked at record lows to keep the economy afloat during this uncertain period.

The City expects earnings at Lloyds to dip 6% both this year and next against this backcloth. And with the bank also having to fight against rocketing PPI bills — a problem that could persist to the end of the decade — I reckon the firm remains a risk too far, even on a low P/E ratio of 10 times and 10.6 times for 2017 and 2018.

But here’s another bargain investment that looks absurdly dirt-cheap:

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Here’s a dirt-cheap FTSE 100 share to consider before it surges again!

This FTSE 100 share may have doubled in value in 2025. But as Royston Wild explains, it still looks like…

Read more »

Man thinking about artificial intelligence investing algorithms
Investing Articles

Can I buy Cathie Wood’s ARK Innovation ETF for my ISA or SIPP?

The ARK Innovation ETF is a US investment fund. Can the product be bought for an Individual Savings Account or…

Read more »

Little girl helping her Grandad plant tomatoes in a greenhouse in his garden.
Investing Articles

Lloyds shares: here’s the latest price and dividend forecasts

Harvey Jones is thrilled with the total return from his Lloyds shares. Now he examines whether they can keep serving…

Read more »

Investing Articles

Up 50% and 30% in a year! These 2 FTSE 100 dividend shares are behaving like growth stocks

When dividend shares deliver growth as well, investors are in luck. These two FTSE 100 shares are best known for…

Read more »

Middle aged businesswoman using laptop while working from home
Investing Articles

2 stocks every passive income seeker should know about

Dividend shares can be great sources of passive income. Stephen Wright likes the look of two that have fallen out…

Read more »

Mature black woman at home texting on her cell phone while sitting on the couch
Dividend Shares

I asked ChatGPT for the best FTSE 250 stocks for passive income, with these results!

Jon Smith asks his AI friend for advice regarding passive income options, but doesn't agree with all the results that…

Read more »

A handsome mature bald bearded black man in a sunglasses and a fashionable blue or teal costume with a tie is standing in front of a wall made of striped wooden timbers and fastening a suit button
Investing Articles

Want to make a million from penny shares? Here’s 1 way to try

Investors wanting to build up a potential millionaire portfolio with diversified penny shares might want to consider adding this one.

Read more »

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

Want to turn a £20k ISA into a £1m portfolio? Here’s how

Dr James Fox explains the strategy many investors employ when trying to turn their ISA into a life-changing pot of…

Read more »