Thank goodness I didn’t invest in these 3 UK shares 5 years ago!

Harvey Jones highlights three UK shares that have suffered a torrid time lately, and thanks his lucky stars they aren’t wreaking havoc on his investment portfolio.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Two female adult friends walking through the city streets at Christmas. They are talking and smiling as they do some Christmas shopping.

Image source: Getty Images

I’ve done well out of UK shares over the last five years. I’ve had some big winners, including Rolls-Royce and Lloyds Banking Group, and a fair few disappointments such as Glencore and Diageo. I’ve also sidestepped some real trouble. I’ve come close to buying three FTSE 100 stocks that have had a terrible time. Does their future look brighter?

WPP stock has tanked!

My first dodged bullet is advertising group WPP (LSE: WPP). It’s the worst performer on the index down 60% over five years and 65% over 12 months.

The business was already wobbling when I considered buying, as it dealt with the bruising departure of driving force Martin Sorrell in 2018 after three decades. I like buying into companies when they’re out of favour in the hope of a rebound further down the line. There’s been no rebound here.

Advertising spend slid as the cost-of-living crisis left consumers feeling stretched. The pressure on WPP intensified as companies pulled more marketing in-house. The big tech giants are capturing more of the global ad market, while advances in AI encouraged businesses to produce content in-house.

The shares look cheap with a price-to-earnings (P/E) ratio of 5.95, but the apparent 13% yield is illusory because the dividend is being cut. I wouldn’t consider it today.

Persimmon has crumbled

The last five years have also been miserable for Persimmon (LSE: PSN). The shares are down roughly 50%, though there are signs of a recovery, as they’re up a modest 6% in the last year.

It’s been tough for housebuilders as high interest rates push up mortgage costs and squeeze demand, worsening affordability issues. The end of the Help to Buy scheme in 2023 removed a prop of support.

Yet investors might consider buying Persimmon shares today. Interest rates could fall further over the next year, cutting mortgage costs and reviving activity. I don’t expect house prices to rocket as wage growth slows and unemployment climbs, but we still have a housing shortfall. Persimmon is forecast to yield 4.55%. The shares trade on a price-to-earnings ratio of about 14.4. It might be one to consider buying for the next five years.

Cardboard demand under pressure

My final near-miss is paper and packaging specialist Mondi (LSE: MNDI). It’s down 48% over five years. There’s no sign of recovery yet, as it’s down 25% over 12 months.

Mondi has struggled as the cost-of-living crisis knocks online shopping, hitting demand for cardboard. The board blames “challenging conditions” and “subdued demand”, as earnings continue to slide. Management is cutting costs and working existing assets harder while waiting for a wider recovery.

Mondi looks reasonably valued with a price-to-earnings ratio near 12, yet with confidence fragile and key markets over-supplied, I think the recovery will take time. The trailing yield of 6.8% may tempt some and I reckon Mondi should come good with a five-year view. It’s worth considering, but demands patience.

Investing moves in cycles and I can see Persimmon and Mondi enjoying brighter days. I imagine that WPP faces a lot more pain first.

Harvey Jones has positions in Diageo Plc, Glencore Plc, Lloyds Banking Group Plc, and Rolls-Royce Plc. The Motley Fool UK has recommended Diageo Plc, Lloyds Banking Group Plc, and Rolls-Royce Plc. 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.

More on Investing Articles

A handsome mature bald bearded black man in a sunglasses and a fashionable blue or teal costume with a tie is standing in front of a wall made of striped wooden timbers and fastening a suit button
Investing Articles

Is NIO stock the next Tesla?

The NIO share price is up by more than 100% in the past year. Might this Chinese EV firm be…

Read more »

Two business people sitting at cafe working on new project using laptop. Young businesswoman taking notes and businessman working on laptop computer.
Investing Articles

Is this the beginning of a stock market recovery?

Dr James Fox explores whether a stock market recovery is truly on the cards after the US struck a deal…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

Up just 1%: what’s going on with Tesco shares now?

Dr James Fox takes a closer look at Tesco shares after the stock rose less than the rest of the…

Read more »

Rear view image depicting a senior man in his 70s sitting on a bench leading down to the iconic Seven Sisters cliffs on the coastline of East Sussex, UK. The man is wearing casual clothing - blue denim jeans, a red checked shirt, navy blue gilet. The man is having a rest from hiking and his hiking pole is leaning up against the bench.
Investing Articles

How much do I need in a Stocks and Shares ISA to reach a £2,027 monthly passive income?

The new financial year is under way and that means new allowances for the Stocks and Shares ISA! How much…

Read more »

UK coloured flags waving above large crowd on a stadium sport match.
Investing Articles

Why is everyone suddenly buying this dirt-cheap growth stock?

This beaten-down UK growth stock has suddenly become the centre of attention as investors target its recovery potential. The Iran…

Read more »

Finger clicking a button marked 'Buy' on a keyboard
Investing Articles

Why is everyone buying Rolls-Royce shares?

Rolls-Royce shares jumped 10% today, even giving mining stocks a run for their money as the FTSE 100 index suddenly…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

Up 8%: what’s going on with Lloyds shares today?

Dr James Fox takes a closer look at one of the stock market's biggest gainers on Wednesday 8 April after…

Read more »

piggy bank, searching with binoculars
Investing Articles

Fresnillo share price rebounds as a FTSE 100 top mover after a 30% sell-off — what’s next?

The Fresnillo share price has surged today — Andrew Mackie asks whether this FTSE 100 mover is signalling a turning…

Read more »