I’m building a list of the best FTSE 100 stocks to buy in 2025. Here are two I wouldn’t touch with a bargepole.
BP
BP’s share price performance. Created with TradingView
It doesn’t matter how well that a commodity-producing business is run. They have no control over the market forces, and if the price of the product they specialise in sinks, so will their profits.
This is what makes BP (LSE:BP.) such a risky pick, in my view. With OPEC+ countries ignoring calls to cut production, and supply from outside the cartel also tipped to rise, the market could be awash with excess oil that depresses prices.
The threat of a US recession and continued economic downturn in China adds extra peril for oil stocks. And industry analysts have disconcertingly stepped up cutting their oil price forecasts for 2025 in response. The experts at Citi, for instance, even suggest they could plunge to $50 per barrel next year.
Brent crude prices today. Created with TradingView
Of course, these gloomy forecasts aren’t guaranteed. Energy prices could in fact spring higher depending on, for example, OPEC+ production decisions and better-than-expected economic growth.
But the risks to the downside make BP a share I plan to avoid. Further progress in the renewable energy sector could also weigh on fossil fuel producers like this both in 2025 and beyond.
Lloyds Banking Group
Lloyds’ share price performance. Created with TradingView
Lloyds Banking Group (LSE:LLOY) is another popular Footsie share I’m steering well clear of. In fact, I think the possibility of a share price drop here might be higher than with BP in the short term.
One of my chief concerns is that net interest margins (NIMs) could slump over the next 12 months. As the Bank of England (BoE) gears up to cut interest rates, the profits retail banks make on their lending activities may be about to slide.
At Lloyds, the NIM dropped to 2.94% in the first half of 2024, from 3.18% a year earlier, as the benefit of tighter BoE policy earlier on unwound. This in turn pulled pre-tax profit 14% lower.
Traditional banks like this are also watching their margins erode as challenger banks expand their services and ramp up product investment.
Finally, The FTSE 100 bank might face billions of pounds worth of fines related to product mis-selling. The Financial Conduct Authority’s (FCA) investigating claims of overcharging for car loans, for which Lloyds has already set aside £450m. Some analysts believe the final cost could end up somewhere near £4bn.
On the plus side, Lloyds’ earnings could impress if the UK economic recovery continues, driving its share price higher. But this is by no means a certainty if inflationary pressures remain and the cooling US economy causes a broader global slowdown.
On balance, the risks of owning Lloyds shares are also too high for my liking.
The post 2 FTSE 100 shares I think could sink in 2025! appeared first on The Motley Fool UK.
Pound coins for sale — 31 pence?
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
More reading
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Down 25% and with a 6% yield, are BP shares a bargain buy?
The BP share price has just hit a 52-week low. But I still don’t want to invest!
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking 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.
