When I run down the full list of FTSE 100 shares, there are surprisingly few that I wouldn’t want anything to do with. But two absolute ‘no-nos’ jumped out at me.
The first is telecoms giant Vodafone Group (LSE: VOD. After getting swept up in the dotcom thrill of the late 1990s, it’s spent pretty much the entire Millennium working off the subsequent hangover.
In that time it has tempted wave after wave of investors with the prospects of one of the biggest yields on the index. Happily, I resisted its siren call. The sky-high income will mostly have been wiped out by the repeated capital losses.
I’m glad I never bought the shares
A decade ago, the Vodafone share price was at 283p. Today, it stands at 70.7p. It’s fallen by 75% and it won’t stop. It’s down 23% over the last two years, although the rate of descent did slow to 2.1% over 12 months.
Management has been consumed by the interminable task of shrinking its global sprawl and applying focus. CEO Margherita Della Valle is the latest to throw herself into the job. She’s had some success but like the interminable Jarndyce v Jarndyce legal case in Charles Dickens’ Bleak House, the end is never in sight.
To be fair, Vodafone’s first-half revenues did rise 1.6% to €18.3bn. While its German operations struggled, Europe, Africa and Turkey compensated.
And yes, there’s still a decent yield. The shares still should still pay more than 5% next year, even after the dividend is cut in half.
Vodafone isn’t that expensive trading at 11.29 times earnings. But so far my decision to shun the stock has been a winner. I’ll stick with that next year.
And I’m not going to buy BT shares either
I’ve spent much of 2024 brooding over another misfiring telecoms giant, BT Group (LSE: BT). It’s faced a whole army of troubles, including a £520m accounting scandal in Italy, declining revenues from fixed-line services, the costly foray into sports broadcasting, that massive pension deficit and huge investment in its Openreach full-fibre services.
The BT share price traded at 420p a decade ago. It’s dropped more than 62% since and I can buy it for 157p today. Yet in contrast to Vodafone, the BT share price has rallied lately. It’s up an impressive 23.24% in a year.
The stock was boosted by Allison Kirkby’s claim in May that BT had hit a “inflection point” on its massive Openreach investment as costs peaked and benefits started to flow. Interest from two telecoms billionaires – India’s Sunil Bharti Mittal and Mexico’s Carlos Slim – also helped.
Kirkby is looking to trim BT’s global sprawl to focus on more profitable UK services. My worry is that, just like Vodafone, tidying up the mess will consume too much time and energy. It may also distract Kirkby from challenges elsewhere, such as the rise of alt-net broadband providers in the UK.
It’s a coincidence that both stocks are in the telecom sector. Or is it? Either way, I’ll keep my bargepole handy just in case I’m tempted to buy either next year.
