I’m avoiding these FTSE 100 shares like the plague!

The FTSE 100 boasts some great businesses. But there are also a number of dogs, thinks Paul Summers. Here are three he won’t be buying anytime soon.

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Buying shares when no one else will can deliver massive returns in time. But this is far from guaranteed. In fact, I can think of a few beaten-down FTSE 100 stocks that I still wouldn’t go near as things stand.

Dividend cut

Telecommunications juggernaut Vodafone (LSE: VOD) is one example.

It hasn’t always been this way. Go back about around a decade and it featured in my Stocks and Shares ISA. Thankfully, I got out before the rot set in. Shares have more than halved in value in the last five years due to stodgy trading.

And now there’s another reason for me to keep a wide berth.

Earlier in March, investors received the news they were dreading. Vodafone announced its much-prized dividend will be cut from 9 euro cents this financial year to just 4.5 euro cents in FY25 (beginning April 2024).

I think this is a wise, if very belated decision. I also think the company is doing right by exiting the under-performing Italian and Spanish markets. Perhaps these events will collectively mark the point at which sentiment towards Vodafone begins to improve.

However, the amount of debt it carries will still be significant and this makes the risk/reward trade-off unfavourable, in my opinion.

Jam tomorrow

Another firm I’m steering clear of is Ocado (LSE: OCDO).

Having multi-bagged in value over the Covid-19 years, the shares have come back to earth with an almighty thud. And justifiably so, I think.

It’s not that I doubt the company’s technology. Pull up any video showing one of the firm’s fulfilment centres and I dare you not to be impressed.

The problem for me is that it’s taking a long time for the contracts it signs with major retailers to come to fruition. Marks and Spencer‘s decision to withhold paying a £190m bill to the company is another concerning development.

Now, growth stocks like Ocado should benefit from a reduction in interest rates. But the same could be said for a number of top-tier businesses with far more stable earnings.

Unsurprisingly for a company that’s yet to become consistently profitable, there’s also no dividend stream.

Throw in the fact that this is one of the most shorted stocks around and I simply can’t see the attraction of becoming an owner.

Cheap for a reason

A final FTSE 100 stock I’ll gladly leave to others is St James’s Place (LSE: STJ).

If the name rings a bell, it’s because the wealth manager has been in the news for all the wrong reasons. In addition to concerns about clients being charged excessive fees — and not even receiving the services they paid for, in some cases — its funds have been underperforming the global market for a long time.

With sentiment so low, one could assume that the shares are bargain. A price-to-earnings (P/E) ratio of just six certainly implies this is the case.

But I remain wary. Given rumours of poor record keeping, it’s possible that even the £426m St James’s Place has set aside for compensation might not be enough.

Considering that there are companies in the UK market generating consistent profits and showering their owners with cash on a regular basis without any of these red flags, why would I want to invest here?

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.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Ocado Group Plc and Vodafone Group Public. 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.

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