The dogs of the FTSE 250 is a phrase used to describe the worst-performing stocks over a certain period of time. Taking a look at the firms that have underperformed in the short term can provide me with potential buying opportunities if the stocks rally back in the longer term. Here are my thoughts on the names on the list from the UK index.
Struggling with the war impact
I’m going to filter for the worst-performing names over the past month. The wooden spoon goes to Ferrexpo (LSE:FXPO), with the share price down 38% in the past four weeks. Over the last year this loss increases to 59%, showing that it has been moving lower for some time.
The business has been heavily impacted by the war in Ukraine. At the latest count, 754 employees are serving in the Ukrainian armed forces. The disruption to the iron ore pellet facilities means that of the four sites, only up to two are operational.
Naturally this is weighing on the firm. Q3 2023 total commercial production was down 50% versus the same quarter the year before. With production and revenue down, it doesn’t surprise me that the share price is also falling.
It’s a sad situation for the company. The underperformance is due to external factors outside of the management team’s control. However, I don’t see things changing at least until there is some resolution to the war. On that basis, I simply can’t justify buying at the moment.
Weak China demand hurting
The second worst performer is Genus (LSE:GNS). The biotech company focuses on improving animal genetics. Over the past month the stock is down 16% and down 39% over the past year.
The company had been guiding towards weak 2023 results throughout the year. It flagged up the weaker performance from the Chinese economy as hurting the business. This proved correct with the release of the full-year results last month. Profit before tax was down 31% year on year, with poor demand from China to blame.
Yet when I take a step back, I do think this could be a smart purchase now. North America, Latin America and Europe all delivered strong growth in operating profit for the firm. So it’s clear that Genus has the right business model. With various economists expecting the Chinese economy to recover in 2024, this area too could bounce back.
Genus is also fairly unique in what it does. Therefore, I don’t see competition as being a large threat going forward. I’m not saying the firm is a monopoly, but it has strength from its position in the marketplace.
Therefore, of the two FTSE 250 dogs right now, I’d steer clear of Ferrexpo but would consider buying some shares in Genus when I have free funds.
