Should I buy the 2 worst FTSE 100 stocks after they fell 17% in a month?

These two FTSE 100 stocks have had an absolutely rotten month. Harvey Jones is now wondering whether to take advantage and buy them.

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As a rule, I prefer buying FTSE 100 stocks after they’ve crashed, rather than after they’ve soared. I get them for a cheaper price, and reduce the risk of overpaying for a flash-in-the-pan performance.

It’s risky, though. The stock may have fallen for a good reason, and this may only be the start of its troubles.

Wrecked. But rewarding?

Over the last month, two FTSE 100 shares stand out for their underperformance. The first is household goods giant Reckitt (LSE: RKT), whose shares are 16.89% cheaper than just one month ago. That’s a big drop in a short period. Over one year, it’s down 30.58%.

The Reckitt share price has taken a double beating in recent weeks. On 28 February, it crashed more than 10% after reporting a 7% drop in Q4 revenue to £3.6bn. Markets had expected a 1.6% rise. Worse, full-year operating profits plunged 22% to £2.5bn

On 15 March, Reckitt shares crashed another 10%, after a US court ordered its Mead Johnson unit to pay $60m to the mother of a premature baby who died after being fed the company’s Enfamil baby formula. Mead Johnson is appealing but this could open the floodgates to a potential $2bn of claims. Along with the cost, there is the reputational damage to consider too.

Reckitt shares look cheap as a result, trading at 13.19 times earnings. I’d grown used to them trading at a premium valuation of around 22/23 times earnings. The yield is healthier too at 4.56%. Until recently, it paid income of just 2% to 3%.

Tempted? Not me. The stock comes with a huge amount of uncertainty, as court cases can drag on for years. I don’t need that hanging over my portfolio. This one isn’t for me.

So what about buying the month’s worst-performing FTSE 100 stock of all? That dubious honour belongs to Entain (LSE: ENT), whose shares are down 17.36% in that time. Over 12 months, they’re down almost 40%. Is this an unmissable opportunity?

Better bargains out there

Shares in the gambling group, which owns brands such as Coral, Ladbrokes and Gala Bingo, plunged on 7 March, after the board warned stiffer gaming regulations in the UK and Netherlands would knock £40m off earnings in 2024. This follows a brutal £585m fine following an HMRC investigation into its legacy Turkish business. I always thought that gambling was a risky business.

These two issues overshadowed a 1% rise in Entain’s underlying full-year earnings to £1bn, with net gaming revenues up 11% to £4.83bn.

On the plus side, at least the Turkish issue is now done and dusted. Entain should also benefit as its US joint venture with MGM Resorts, BetMGM, becomes the exclusive live odds sports betting partner for social media platform X (formerly Twitter).

Entain isn’t particularly cheap though, trading at 17.14 times earnings, while the yield is a lowly 2.34%. I suspect its shares may bounce back a lot faster than Reckitt’s. Yet I’m not really comfortable with gambling stocks, and recent controversies have done little to change that. I’ll avoid this one too. Reckitt and Entain may be the FTSE 100’s biggest losers, but there are better recovery plays out there.

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.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Reckitt Benckiser 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.

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