These past five years haven’t been very profitable for the FTSE 100. Since February 2016, the Footsie has gained under 500 points to trade at 6,582 today. That’s a five-year return of 8%, similar to the interest paid by top savings accounts. However, adding in yearly dividends of roughly 4% more than triples the FTSE 100’s return since 2016.
The FTSE 100 is a global disappointment
In comparison, the US S&P 500 index has doubled over the past half-decade, rising 1o1% to close at 3,907 points last Friday. Today, the S&P 500 hovers just 1.1% below its all-time intraday high of 3,950 points, set last Tuesday. Alas, the FTSE 100 hit its record intraday high of 7,903 points on 22 May 2018. Since then, it has lost over 1,320 points, diving by a sixth (16.7%). Ouch.
In short, the S&P 500 has been a star and the FTSE 100 a dog, at least since 2016. That’s good news for my family, because we sold our UK investments in 2016, after Britain voted to leave the European Union. We invested the proceeds in US and global funds and stocks, all of which have easily beaten the Footsie since then. But now I see the US stock market as highly overvalued and possibly blowing a giant bubble. Conversely, the FTSE 100 is among the cheapest it’s been in historic terms. Thus, I’m planning to invest a large chunk of capital into dirt-cheap UK stocks.
The FTSE 100’s biggest dogs
These are the 12 worst-performing FTSE 100 shares over the past five years. Each is a ‘fallen angel’ — a household name that has fallen on hard times. Many of these 12 company shares have been smashed by the economic downturn due to Covid-19. Here they are, in order of best to worst performer (by percentage share-price fall):
Associated British Foods -26.6%
NatWest Group -28.5%
British Land -32.1%
British American Tobacco -33.5%
Lloyds Banking Group -38.8%
Vodafone Group -39.2%
Land Securities Group -40.4%
International Consolidated Airlines Group -55.3%
Rolls Royce Holdings -56.5%
Imperial Brands Group -62.6%
BT Group -71.7%
Could these Footsie dogs become stars again?
Somewhat predictably, there is a fair degree of grouping among these 12 dogs of the FTSE 100. There are two banks (NatWest and Lloyds) and two property firms (British Land and Land securities). There are two tobacco companies (BAT and Imperial Brands) and two telecoms providers (BT and Vodafone). Also, there are two companies with heavy exposure to air travel (British Airways owner ICAG and jet-engine market Rolls-Royce). ABF owns retailer Primark and sells sugar and foodstuffs worldwide. WPP is the world’s #1 advertising and marketing agency. But, in my view, each of these 12 dogs could possibly make a comeback to rise again.
As a contrarian investor, I’m happy to go against the herd. Likewise, as a hunter of value shares, I love bottom-fishing for cheap FTSE 100 stocks. Hence, if you forced me to create a mini-portfolio of these’ dirty dozen’ dogs, I wouldn’t object. I might be wrong, but I see potential for company earnings to rebound strongly in a post-Covid-19 economy. However, free to choose my own stocks, I’d buy NWG, Lloyds, and BT for potential capital gains. Also, I’d buy BAT, Vodafone, and Imperial for their juicy dividend yields.
Finally, if you’re a long-standing owner of any of the FTSE 100 dogs, then fingers crossed for a future recovery. Always remember that share prices don’t move in straight lines — and that today’s dogs can sometimes become tomorrow’s stars!
Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods, British Land Co, Imperial Brands, Landsec, and Lloyds Banking Group. 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.