I like buying UK stocks when they’re down in the dumps. The aim is to buy them cheaply, lock into a higher dividend yield, then sit back and wait for the recovery.
It’s not a failsafe strategy though. Share prices don’t fall for no reason. Sales and profits may have dropped, demand might be weak, or a competitor may be challenging for market share.
These three FTSE 100 names have all fallen exactly 30% in the past year. Are they worth considering as a result?
JD Sports Fashion disaster
JD Sports (LSE: JD) styles itself the ‘King of Trainers’, but lately its crown has slipped. The cost-of-living crisis has hit sales and profits, while troubles at key supplier Nike and Donald Trump’s trade tariffs have upped the pain.
I bought the stock for my Self-Invested Personal Pension (SIPP) 18 months ago, thinking I was getting a bargain, only to watch it keep sliding. There are now signs of stabilisation. In the 26 weeks to 2 August, sales rose 18% to £5.9billion, and management reaffirmed full-year profit guidance, while warning that trading remains “tough”.
With a dirt cheap price-to-earnings ratio of just 7.7, JD looks incredible value. The recovery depends on US and UK consumers regaining confidence, and I think that could take time. Still, I think the shares are worth considering for long-term investors prepared to wait.
Diageo needs to show some spirit
Diageo (LSE: DGE) has also stumbled as the global economy slows. The drinks giant has suffered from cost-of-living pressures, US tariffs, and a shift among younger consumers towards healthier lifestyles and lower alcohol intake. That last factor could make its rebound slower.
Yet Diageo retains a world-class brand portfolio, with names such as Johnnie Walker, Guinness, Baileys, and Smirnoff. If global consumers starts spending — and drinking — Diageo will be first to benefit. Its wide international reach is an advantage long term, even if it’s an issue right now, as demand cools in key markets like North America and China.
With a P/E of 14.9 and a trailing dividend yield of 4.3%, Diageo looks decent value for patient investors. The company’s fundamentals remain strong, and sentiment should eventually swing back in its favour. Again though, it may take time.
Persimmon’s another recovery play
The housebuilding sector has struggled for years, and Persimmon‘s (LSE: PSN) no exception. High mortgage rates and weak consumer confidence continue to choke demand despite the UK’s chronic housing shortage.
In its half-year results on 13 August, Persimmon reported a 7% rise in private completions to 3,987 and an 8% increase in average selling prices to £284,047. Which looks promising.
Even so, sticky inflation and our sluggish economy could delay the housing market recovery, with the IMF forecasting GDP growth of just 0.5% next year. With a P/E of 12.75 and a dividend yield of 5.22%, Persimmon stock looks good value and worth considering for income-focused investors. Again, the recovery may take time, but Persimmon’s foundations appear firm.
All three shares face short-term challenges but if the wider economy picks up at some point, there’s a fair chance they could fly.
