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As Bitcoin plummets I think these recovery shares look far more profitable

After a lot of hype and discussion around dinner tables only a little while back, it seems like now the wheels have well and truly come off Bitcoin. Sure, it will have made some people rich but it seems clear that overall it is an astonishingly bad investment, falling over 60% in the last 12 months. Even a poor year for the stock market in 2018 was nowhere near as bad – and many stocks pay dividends, helping investors in companies ride out short-term dips. Bitcoin’s decline looks terminal, the stock market’s, almost without doubt, isn’t.

SSE (LSE: SSE) is one company that has had a tough time, reflected in its high dividend yield (currently 8.3%+) and its low price-to-earnings (P/E) ratio of just over nine. There’s clearly a risk that further bad news could come from the company to likely push down the share price, or the sector as a whole could continue to be negatively affected by concern over a potential Labour government which has talked about nationalising industries such as energy.

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Lacklustre performance not helping

Putting aside the political threat, SSE has been hampered by the cancellation of the merger with Npower for much of its retail business and the business is struggling like the other big energy suppliers as it keeps losing customers (460,000 in the year to September).

The half-year report in November operating profit, adjusted to exclude the contribution of SSE Energy Services, down 24.4% to £448m. The positive however for investors is that the company now has much lower expectations so the chance to outperform in the future is higher. Essentially, bad news is already built in to the low share price and the company is increasingly focusing on renewables, which could be a big driver of future profits as the UK looks to meet environmental targets. In the meantime, the high dividend provides income for investors prepared to wait for the performance to turn around. 

Making a change at the top

BT (LSE: BT.A) is another share that has struggled for a few years but recently it looked like the business was starting to turn a corner. Its last half-year results showed EBITDA up 2% to £3.7bn. That may make the job of new boss Philip Jansen a little easier, although there is a risk that he gets the bad news out the way at the start of his reign to lower expectations. As BT’s accounting scandal in Italy shows, there are probably skeletons to be found in the closet. That said, although a new boss presents some risk in the immediate future, further on, BT does have a number of positives for investors.

A tempting dividend and the potential for growth

There is the dividend, which is currently 6.5%. The shares are also good value as the P/E ratio is under nine. Assuming it can improve its performance, there’s potential for a positive re-rating to push up the share price. The business is focusing on cost-cutting and is offering more services to customers by bundling TV, internet and mobile contracts, together these mean it can make more money. Also, if the new CEO can be on better terms with the regulators the drag on the performance of the business from the split of Openreach could also be put behind it and allow the firm to look forward and grow.

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Andy Ross 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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