2024 proved challenging for many UK stocks with some plunging more than 20%. These three FTSE 100 blue-chips were among them. Can they use this as a springboard to bounce back and should investors consider buying them?
Global asset manager Schroders (LSE: SDR) fell 27% over the last 12 months as fee income and assets under management declined. Rising interest rates and market volatility deterred investors, leading to net outflows. This isn’t a one-off. Schroders is down 47% over three years.
With a price-to-earnings (P/E) ratio of just 12.5 and a tempting trailing yield of 6.99%, it looks a bargain. But there’s a catch. Schroders has been a dirt cheap high-yielder for years, yet its shares keep falling.
Can Schroders shares reverse the slump?
The problem isn’t unique to Schroders. Many FTSE 100 financials are struggling as high inflation and interest rates dampen investor confidence. To thrive in 2025, Schroders needs sentiment to improve. That requires global stability, including how President-elect Donald Trump handles trade tariffs. Patient, long-term investors are likely to see rewards.
Housebuilder Persimmon‘s (LSE: PSN) another struggler. Its shares are down 22% over 12 months and 56% over three years.
There’s some optimism though. Persimmon’s stock jumped over 5% yesterday (14 January) after the board forecast full-year pre-tax profit at the upper end of expectations, supported by healthy completions. Despite higher mortgage costs and a slowing housing market, its average selling price rose 5% to around £268,500.
With a P/E of 13.5 and a yield of 5.39%, Persimmon looks appealing. But risks remain. The UK economy could slow, inflation might rise again, and higher mortgage costs could deter buyers. Resurgent inflation could also push up material and labour costs, squeezing margins.
I’m optimistic about Persimmon too
Still, there’s long-term support from the UK’s housing shortage. Demand exists if affordability improves. Should interest rates ease in 2025, Persimmon could rebound. I’d buy it, but I already hold rival Taylor Wimpey, which I also expect to recover from a 20%-plus drop over the last year.
My final underperformer is speciality chemicals company Croda (LSE: CRDA). It thrived during the pandemic as customers stocked up on its personal care and life sciences products, but they’ve since been winding down inventories.
Sales volumes and profitability slumped as a result, with unfavourable currency movements upping the pressure. Croda’s share price is down 31% over one year and 63% over three.
At some point, customers will need to restock, especially as the global economy improves. Croda’s innovative portfolio, with a focus on sustainable ingredients, positions it well for the future. Its investments in biotechnology and niche markets, including crop protection and pharmaceuticals, offer significant potential upside. The trailing yield’s 3.5%.
While its P/E of 18.6 isn’t exactly cheap, it’s far below the 30-times earnings multiple seen a year or so ago. Risks include volatile raw material prices and geopolitical uncertainty, but if Croda capitalises on its R&D, it should soon reassert itself.
Buying underperforming stocks can feel like a gamble. But the early stages of a share price recovery are typically the most rewarding. By waiting until they’re winning again, investors will miss it.
All three are worth considering, in my view. But strong nerves are required.
