The Motley Fool

2 high-risk FTSE 100 stocks I won’t touch with a bargepole

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.

Road sign warning of a risk ahead
Image source: Getty Images.

For the likes of Intu Properties (LSE: INTU) things are going from bad to worse. The FTSE 100 share has been under the cosh for the past couple of years, true. But more recent news flow suggests it could be on the verge of extinction.

The Brexit uncertainty that has battered consumer confidence is proving quite tame compared with the upheaval that Covid-19-related lockdowns have caused. The prospect of a deep recession starting from the second quarter suggests that things will remain difficult for retailers. And by extension for this particular Footsie firm.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Fresh plans from Business Secretary Alok Sharma mean that retail property owners Intu could find it even more difficult to collect rents from its embattled tenants.

More bad news

The plans from Sharma will prohibit retail landlords from using “aggressive” tactics to collect rents. They will temporarily void statutory demands and winding up petitions issued to commercial tenants, for one. They will also prohibit landlords from using the Commercial Rent Arrears Recovery mechanism unless 90 days of rent is owed.

Sharma commented that “it is vital that we ensure businesses are kept afloat so that they can continue to provide the jobs our economy needs beyond the coronavirus pandemic.” This will come as little consolation to Intu Properties, however, when the company is already struggling underneath a suffocating mountain of debt and a catastrophe in rent collections.

So forget about its ridiculously low forward price-to-earnings (P/E) ratio of 1.1 times, I say. This FTSE 100 stock carries too much risk to warrant interest from sensible investors.

Screen of price moves in the FTSE 100

How about this FTSE 100 stock’s 6.6% yield?

Would investors be better off ploughing their cash into Rio Tinto (LSE: RIO)? Despite the coronavirus outbreak, iron ore values have remained remarkably robust. Indeed they have recently surged to 2020 highs on news that another mega miner, Vale, had slashed its production guidance for 2020. It’s a development that could remove up to 25m tonnes of iron ore from the market.

I fear that this price momentum could struggle to keep going, though. With a painful and prolonged downturn in the global economy lurking, I think demand from steel mills inside China and elsewhere could begin to unravel quickly.

Fresh figures from UBS have fanned my fears, too. According to the bank, worldwide crude steel production dropped 6% year on year in March. In China output dropped 2% while steel mills outside the Asian powerhouse toppled 11%. Hopes of a tightening iron ore market could very quickly unravel, then, dragging the commodity price lower and with it Rio’s profits.

This is why I don’t care much for the mining giant’s low P/E ratio of below 10 times for 2020. I’m also unmoved by its whopping 6.6% dividend yield. Rio is another FTSE 100 stock I am avoiding at all costs.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.