2 FTSE 100 value shares I think could be train wrecks in 2024!

These popular FTSE 100 shares are in the pre-Christmas sales! But I think investors should consider leaving them on the shelf.

| More on:

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.

Photo of a man going through financial problems

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

These FTSE 100 shares seem to offer exceptional all-round value at the moment. So what’s the catch?

BP

Oil majors like BP (LSE:BP) have plummeted again as crude prices have retraced. Worrying economic indicators from the US and China — combined with a steady rise in North American stockpiles — have driven black gold values through the floor.

There are also growing doubts over whether certain OPEC+ countries will adhere to the broader group’s stated production curbs.

Worsening conflict in the Middle East could prompt a sharp rebound in the oil price. But things look like they could get a lot worse for crude during 2024 and, by extension, the oil sector.

This explains the rock-bottom valuation that BP’s share price currently commands. It trades on a price-to-earnings (P/E) ratio of 7.1 times for next year.

Profits at oil producers are also under threat as demand for clean energy soars. Earlier this year the International Energy Agency (IEA) brought forward its ‘peak oil’ forecasts on the back of soaring electric vehicle (EVs) sales and rising renewables demand.

Recent investment in green energy should help to support earnings but this Footsie company faces significant obstacles moving forwards.

Not even a chunky 5.1% dividend yield for the next 12 months is enough to encourage me to buy BP shares.

Lloyds Bank

Banking stock Lloyds (LSE:LLOY) also faces a difficult 2024 as the UK economy struggles. A slowdown in loan growth and an increase in impairments are expected to continue in the coming months.

I’m especially worried about the company’s reliance on a strong housing market to grow profits. Moderating inflation means the Bank of England (BoE) is tipped to end its rate hiking cycle. But interest rates still look set to remain well above recent norms, choking off new mortgage demand.

Trade association UK Finance thinks lending for house purchases will drop another 8% in 2024, to £120bn. It also predicts that the number of mortgages in arrears will keep ticking higher over the short term, to 128,800 in 2024 and 137,800 in 2025.

Source: UK Finance

Unfortunately, the Black Horse Bank has only a negligible presence on foreign shores. So it will have limited scope to grow profits next year — the BoE expects GDP growth to flatline at 0.1% during the fourth quarter.

At the same time, Lloyds faces a tough battle to retain customers and maintain a healthy net interest margin (NIM) as challenger banks intensify their attacks.

New entrant JN Bank, for instance, tripled customer deposits to £300m in the last two months, thanks to its high savings rates. The challengers also continue to expand their services to grab market share (OakNorth launched its new service for mid-sized businesses last month).

Lloyds’ strong brand name could help it to bat back some of this pressure. And ongoing cost-cutting should boost profits. But the threat to the company’s earnings remains high and is steadily growing.

So despite its low P/E ratio of 6.1 times for 2024 and 6.9% dividend yield, I’m not tempted to invest. I’m searching for other dirt cheap FTSE 100 stocks to buy instead.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

US Stock

Here are the best-performing S&P 500 stocks after the US election result

Jon Smith notes some of the largest gainers from the S&P 500 yesterday and explains how the election result has…

Read more »

Growth Shares

2 UK stocks knocking on the door of promotion to the FTSE 100

Jon Smith points out a couple of UK stocks that he feels could be ready for the big league based…

Read more »

Investing Articles

Rolls-Royce shares just fell 7%. Is it time to buy?

This investor in Rolls-Royce shares takes a look at the FTSE 100 engine maker's trading update to see what caused…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

What’s going on with the Auto Trader share price?

Paul Summers takes a closer look at why the Auto Trader share price has tumbled despite the company posting higher…

Read more »

Investing Articles

Legal & General shares look set to give me a mind-blowing 10.22% yield in 2026!

Harvey Jones is getting a brilliant second income from his Legal & General shares and expects even more to come.…

Read more »

Investing Articles

I’d consider this beaten-down FTSE 100 dividend stock to target a second income of £19,000

Our writer sees an opportunity to earn a substantial second income by investing in this UK insurance giant. Here’s his…

Read more »

Investing Articles

How cheap is the 72p Vodafone share price?

The Vodafone share price looks very cheap having fallen to a 72p price tag. But is it really the bargain…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Up 43% in a year and the IAG share price could keep on rising!

One of the FTSE 100’s highest-flying stocks still looks cheap on an earnings basis. Is this a brilliant buy for…

Read more »