I’ve bought three beaten-down UK growth shares over the last two years, hoping to benefit when they return to form. So far, they’ve only got worse. Can they turn things round in 2026?
I’ve always been reluctant to chase momentum, favouring FTSE 100 shares that are out of favour instead. The theory is that by purchasing them at a lower valuation and higher yield, I’ll benefit when they swing back into favour. But what if they don’t?
London Stock Exchange Group
I added financial data and trading specialist London Stock Exchange Group (LSE: LSEG) to my Self-Invested Personal Pension (SIPP) last September, and again in December.
The shares had plunged more than 30% in a year, slashing its price-to-earnings (P/E) ratio from a dizzying 35 to a more reasonable 22. I’d wanted to buy the stock for years, and decided this was my moment.
Today, I’m wondering if bought the stock on a false assumption. Basically, I’d assumed that once the short-term volatility passed, the shares would resume their old growth trajectory. Yet this is now a £44bn company, and simply can’t climb at its previous speed.
London Stock Exchange Group is investing heavily in AI to boost its customer offering, but as we’ve seen with other stocks, investors now question if this will generate the hoped-for return. They also fear AI could replicate its offerings at a fraction of the price. I think this could be a tense year for the stock.
JD Sports Fashion
I’ll also be on tenterhooks while I wait to see whether the JD Sports (LSE: JD) share price can swing back into fashion in 2026. The trainer and sportswear specialist has taken a beating, the shares down 47% over two years and 10% last year.
Consumers are being squeezed, and sales disappointed in Christmas 2023 and 2024. In mid-January, we’ll know how Christmas 2025 went. That’s likely to set the tone for the rest of the year.
With the economy slowing and its core market of young people struggling for jobs and cash, I fear the recovery will be delayed again. JD is so insanely cheap, with a P/E below 10, that I think it’s got enormous comeback potential, but I may have to be patient for another year or two.
Diageo
The same goes for Diageo (LSE: DGE). I bought the spirits giant shortly after it issued a profit warning in November 2023, and averaged down after every subsequent warning, only for its slide to continue.
The Diageo share price plummeted 37% last year, and is down 56% over three. It still sold $20.2bn of drinks last year, a dip of just 0.1% on 2024, while free cash flow surged to $2.7bn.
Yet there are clearly issues. Operating profits plunged 27.8% to $4.3bn, with margins falling 119 basis points to 21.4%. Again, consumers are struggling, while health concerns threaten long-term alcohol sales.
But of the three, Diageo excites me most. I might even buy more. New CEO Dave Lewis turned Tesco around nicely, and a PE of 13 and dividend yield of almost 5% is attractive. But like the other two, this could go either way. Investors should explore the risks and rewards carefully, before considering any of them. I don’t think I’m completely mad buying these shares, but it could be time before I discover weather
