My portfolio has been ticking along very nicely this year, with the majority of my UK stocks delivering positive gains. Companies like Rolls-Royce, Barclays and Shell have performed exceptionally well in the past few months.
However, two stocks in particular are dragging down my otherwise impressive profit and loss (P&L) percentage: Vodafone (LSE:VOD) and Reckitt (LSE:RKT). These two stocks are down 26% and 31%, respectively, over the past year.
I’m hesitant to sell because I truly believe in these two well-established and popular UK companies. However, I’m coming close to throwing in the towel on both of them. With that said, I want to find out if they have any chance of turning their fortunes around soon.
Vodafone
Vodafone’s downward spiral has been painful to watch. Since 2020, it has attempted three price recoveries – only to end each year worse than it began. 2022 was particularly bad, with the stock falling 40% after climbing 24% in the first six weeks. Now at 68p a share, it’s half the price it was five years ago.
Yet not every analyst is as gloomy as me. Last month, Polo Tang of UBS reiterated his ‘Buy’ rating for Vodafone with a price target of 98p. David Wright of Bank of America is even more optimistic, having reiterated a price target of 113p on 4 April. But the majority of analysts are sticking with ‘Hold’ ratings – for now.
While there’s little reason to explain the specific decline, Vodafone is working hard to turn things around. It recently sold its Italian business for €8bn, half of which it has dedicated to a share buyback programme. Furthermore, it has slashed its dividend yield in half starting in 2025, which will allow it to reinvest more profits back into the company.
I’ll admit, I’m at my wits end but I’m prepared to hold a bit longer to see if this recovery strategy actually works.
Reckitt
Multinational consumer goods retailer Reckitt — or Reckitt Benckiser Group to give it its full, official name — has had a similarly dismal time since Covid. After initially making gains during the first few months of the pandemic, it rapidly fell back to pre-Covid levels. For a while, it almost looked like it might recover – and then disaster hit.
In late February this year, news emerged of a lawsuit Reckitt faced claiming its baby formula contributed to the death of a premature child in the US. When it ultimately lost the case on 15 March, the company suffered its worst loss in over two decades.
So far, the fallout has wiped 27% off the share price and £16bn from the company’s market value – and things are likely to get worse. Reports indicate hundreds of similar claims have now been filed across the US.
However, Reckitt is an international conglomerate with a multitude of diverse products that are in no way connected to its baby formula. While the lawsuits aren’t exactly a minor setback, I think the company will eventually recover. Opportunistic investors may even see this dip as a chance to grab some cheap shares, which could help to prompt a recovery.
I don’t need to sell my shares just yet but I can’t promise I’ll hold much longer if things continue to get worse.
