Thank goodness I didn’t invest in these 3 UK shares 5 years ago!
Iâve done well out of UK shares over the last five years. Iâve had some big winners, including Rolls-Royce and Lloyds Banking Group, and a fair few disappointments such as Glencore and Diageo. Iâve also sidestepped some real trouble. I’ve come close to buying three FTSE 100 stocks that have had a terrible time. Does their future look brighter?
WPP stock has tanked!
My first dodged bullet is advertising group WPP (LSE: WPP). It’s the worst performer on the index down 60% over five years and 65% over 12 months.
The business was already wobbling when I considered buying, as it dealt with the bruising departure of driving force Martin Sorrell in 2018 after three decades. I like buying into companies when they’re out of favour in the hope of a rebound further down the line. There’s been no rebound here.
Advertising spend slid as the cost-of-living crisis left consumers feeling stretched. The pressure on WPP intensified as companies pulled more marketing in-house. The big tech giants are capturing more of the global ad market, while advances in AI encouraged businesses to produce content in-house.
The shares look cheap with a price-to-earnings (P/E) ratio of 5.95, but the apparent 13% yield is illusory because the dividend is being cut. I wouldn’t consider it today.
Persimmon has crumbled
The last five years have also been miserable for Persimmon (LSE: PSN). The shares are down roughly 50%, though there are signs of a recovery, as they’re up a modest 6% in the last year.
It’s been tough for housebuilders as high interest rates push up mortgage costs and squeeze demand, worsening affordability issues. The end of the Help to Buy scheme in 2023 removed a prop of support.
Yet investors might consider buying Persimmon shares today. Interest rates could fall further over the next year, cutting mortgage costs and reviving activity. I don’t expect house prices to rocket as wage growth slows and unemployment climbs, but we still have a housing shortfall. Persimmon is forecast to yield 4.55%. The shares trade on a price-to-earnings ratio of about 14.4. It might be one to consider buying for the next five years.
Cardboard demand under pressure
My final near-miss is paper and packaging specialist Mondi (LSE: MNDI). It’s down 48% over five years. There’s no sign of recovery yet, as it’s down 25% over 12 months.
Mondi has struggled as the cost-of-living crisis knocks online shopping, hitting demand for cardboard. The board blames “challenging conditions” and “subdued demand”, as earnings continue to slide. Management is cutting costs and working existing assets harder while waiting for a wider recovery.
Mondi looks reasonably valued with a price-to-earnings ratio near 12, yet with confidence fragile and key markets over-supplied, I think the recovery will take time. The trailing yield of 6.8% may tempt some and I reckon Mondi should come good with a five-year view. It’s worth considering, but demands patience.
Investing moves in cycles and I can see Persimmon and Mondi enjoying brighter days. I imagine that WPP faces a lot more pain first.
The post Thank goodness I didnât invest in these 3 UK shares 5 years ago! appeared first on The Motley Fool UK.
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Harvey Jones has positions in Diageo Plc, Glencore Plc, Lloyds Banking Group Plc, and Rolls-Royce Plc. The Motley Fool UK has recommended Diageo Plc, Lloyds Banking Group Plc, and Rolls-Royce 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.
