Securing a place on the FTSE 100 is no easy feat, typically achieved through years of consistent growth and solid performance. Around 80% of constituents are well-established companies with long-term growth potential.
So there aren’t a lot of stocks on there I’d avoid?
Even the best companies slip into risky territory, whether it be from managerial failings or external factors. In some instances, geopolitical issues disrupt supply chains or a competitor swoops in and steals market share.
BP‘s suffered recently from oil price fluctuations and costly efforts to meet sustainability goals. Reckitt Benckiser took heavy losses this year after a lawsuit resulted in a costly fine. Both holdings of mine, I trust these short-term issues will be resolved and they’ll recover.
However, there are two Footsie stocks for which I see little hope on the horizon. I’d happily be proven wrong but I don’t plan to invest in these shares any time soon.
Here’s why.
A dwindling industry
Paper and packing giant Mondi‘s (LSE: MNDI) been in decline for several years now, falling 35% in the past five years.
2023 was a particularly tough year for the European packaging industry. It suffered a slowdown after Covid, with a 12% drop in paper and board production.
In March, a brief 20% price gain came after plans to merge with competitor DS Smith. But in April it pulled out of the deal and the price fell again. Struggling to profit in a dwindling industry, I see little hope for recovery.
Now at £12.14, it’s nearing its lowest level in 10 years. It’s also being shorted by eight fund managers, including Marshall Wace and Millennium International.
It could be working towards a solution though. In partnership with Coca-Cola, it aims to provide paper alternatives to plastic packaging. This could help it create fresh demand for its products.
Even if the price struggles to recover, it does offer some value in dividends. The yield currently sits at 4.9% and payments have remained fairly stable since Covid.
I’m not writing it off completely, but it’s certainly not on my list for 2025.
No room for improvement?
The parent of home improvement store B&Q, Kingfisher (LSE: KGF), was initially doing well this year. But things took a turn in September. After jumping 20% on a positive earnings call, the stock began declining before crashing 15% last month.
Sales have tapered off this year, possibly due to inflation and a slowdown in the housing market. The group’s Castorama and Brico Dépôt stores in France suffered particularly underwhelming results. Rising wages and energy costs combined with supply chain issues have also strangled profits.
There are currently nine short positions open on the stock, making it one of the most shorted companies on the FTSE 100.
There’s some light on the horizon though. With earnings forecast to grow 10% a year, the current price looks cheap. With a forward price-to-earnings (P/E) ratio of 11.6, it looks undervalued compared to competitors. So if things do turn around, investors could profit.
Like Mondi, it also has a 4.9% yield which is expected to remain stable.
Still, while the property market remains shaky, Kingfisher’s too risky for me. If things improve next year, I’ll reconsider the stock for 2026 or beyond.
The post 2 FTSE 100 shares I plan to avoid like the plague 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
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As the Kingfisher share price drops on Budget fallout, should I buy?
Mark Hartley has positions in Bp P.l.c. and Reckitt Benckiser Group Plc. The Motley Fool UK has recommended DS Smith and Reckitt Benckiser 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.
