We’re almost halfway through 2023. A lot has happened in the market, both good and bad. This has been reflected in the stark contrast in some of the stock moves in the FTSE 100. Despite the best performer being up 69% over the past six months, the worst performers are heavily in the red. Is it worth considering to buy any of the flops as value purchases?
No optimism around the biggest loser
As a quick disclaimer, when I talk about the worst performers in the FTSE 100 over the past six months, I’m referring to stocks that are still in the index and haven’t been relegated to the FTSE 250. Also, the figures are based over six months, but investors should use other time periods (such as one year or longer) to get an understanding of share price movements before making a choice on whether to buy or not.
The worst performer as it stands is Ocado Group (LSE:OCDO). The 38% fall in the business over the six months doesn’t surprise me, as it has felt the brunt of high inflation here in the UK.
Despite the business showing strong revenue growth in the UK and International Solutions divisions, the revenue is dwarfed by the UK retail arm. Unfortunately, high cost inflation pressures meant the grocery retail arm swung from a profit of £150.4m in 2021 to a loss of £4m in 2022.
Even with inflation starting to fall, I expect it to remain elevated for some time. Therefore, I’d stay well away from buying Ocado shares, as I believe the problem won’t be over for the foreseeable future.
Finding value in fallen angels
Fresnillo (LSE:FRES) is the next biggest loser, falling 22% over the past six months. The Mexican commodity miner posted really disappointing 2022 full-year results.
Profit before tax dropped by 59.4%, an eye-watering amount for the company. The results were impacted by “industry pressures including volatile precious metal prices and higher cost inflation”. Labour reform in Mexico was another factor that increased costs.
As we currently stand, I don’t feel that enough time has passed for investors to accurately draw a conclusion as to how the rest of 2023 will play out for the stock. Production levels posted in April were good, but I feel it’s a high-risk investment right now.
Rounding out the top three is British American Tobacco (LSE:BATS). Down 22% over the last six months, it recently touched 52-week lows.
I believe this is the best of the three ideas for investors to consider buying now. The recent change of CEO and disappointing US performance isn’t great, but this is a stalwart of the FTSE 100. Profitability is still good and it operates in a sector with high barriers to entry.
I also need to add in the mix the generous dividend pay out. The move lower in the share price has pushed the current dividend yield up to 9%! This makes it one of the highest yielders in the index.
