2 FTSE 250 shares I won’t touch with a bargepole in 2025

Zaven Boyrazian points out two FTSE 250 shares he’d stay well away from in 2025, no matter how tempting their cheap stock prices seem.

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The FTSE 250‘s home to a lot of interesting stocks, but sadly, not all of them look like good investments. In fact, running down the list, I see that there are quite a few I’m avoiding like the plague. And that includes John Wood Group (LSE:WG.) and Close Brothers Group (LSE:CBG).

Both companies have found themselves in hot water this year. Questions from investors are now circulating regarding both firm’s financial health, as well as uncertainty surrounding looming external threats. With that in mind, it’s no surprise both stocks have seen around two-thirds of their market-caps wiped out. What’s going on?

Financial audits are never a good sign

It doesn’t take more than a quick glance at John Wood’s stock price chart to notice that something’s very wrong. Since the start of 2024, the FTSE 250 stock has collapsed by over 60%, suffering from two double-digit crashes in August and November.

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All of this comes after failed multiple takeover bids in the later stages of due diligence and negotiation. Then, in its subsequent results, an impairment charge of $815m and $140m in project exit expenses were announced, along with an independent audit of its financials.

To be fair, an impairment charge doesn’t affect cash flow. And the firm’s consulting division does appear to be performing admirably, delivering better margins. As such, management’s reiterated its full-year guidance. However, with more questions than answers, John Wood Group isn’t a business I’m rushing to add to my portfolio today, even if the valuation looks cheap.

Regulatory probes are bad for business

Close Brothers is another stock that’s taken a massive hit this year, falling by more than 70% since January. In fact, it’s fallen so much that its price-to-earnings ratio sits at just 3.5 today. By itself, an earnings multiple this low suggests a screaming buying opportunity. But after closer inspection, this seems to be nothing more than a value trap, in my opinion.

The company’s found itself at the centre of the ongoing FCA investigation into motor finance loans and undisclosed commissions. The regulatory probe’s still ongoing, but if it finds wrongdoing, Close Brothers could be facing a fine of up to £640m, according to estimates by analysts at RBC Capital Markets. That’s almost six times what the firm made in net profit in its 2024 fiscal year ending in July.

As horrendous as this sounds, it’s important to note that nothing’s guaranteed. Even if Close Brothers is found liable, the fine could be considerably less than currently expected. Given how low the stock price is, that could spark a welcome rally in the short term.

However, just like with John Wood Group, I’m not interested in investing in a business that’s shrouded with uncertainty, especially when regulators are involved.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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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