If you’re frustrated by the performance of your portfolio in 2016, spare a thought for investors in Sports Direct (LSE: SPD), Laird (LSE: LRD) and Countrywide (LSE: CWD) – three of the worst performing shares in the FTSE 350 over the past year. Here’s why they’ve come unstuck.
Biggest losers
Accusations of dubious working practices, public spats with politicians and numerous public relations gaffes have led shares in Sports Direct to surrender over half their value in the last 12 months.
Although the company is at pains to say that it’s addressing its various problems, this is unlikely to soothe investors nerves after December’s interim results revealed a 57% plunge in half-year profits. News that the company is in the process of purchasing a £40m corporate jet isn’t the best way of regaining trust.
Back in October, Laird’s shares tanked after the company reported reduced demand from its biggest customer, Apple. This was particularly problematic for the £420m cap component supplier as it had been hoping for a surge in demand from the latter’s new phone in September. When this didn’t happen, Laird was forced to estimate that full-year pre-tax profits would be far less than the £67m-£80m analysts were expecting. The company was also dealt a blow when Samsung — another customer — experienced problems with its now infamous Galaxy Note 7.
Things haven’t been much better for £383m cap Countrywide, the UK’s biggest lettings and estate agency company. Priced around 400p at the start of the year, it’s been downhill ever since June’s referendum vote triggered a slowdown in the property market. Last month’s decision by Philip Hammond to ban companies from charging fees to tenants only increased the pain.
Despite losing over 57% in value in 12 months, shares in Countrywide are likely to dip even lower in the short term as the company — along with Laird — is removed from the FTSE 250 and fund managers adjust their portfolios.
Contrarian bets?
If you can ignore the behaviour of its board (which, admittedly, is quite a big ask), Sports Direct is still a decent business. After all, this is a company that once managed to generate consistently high returns on capital and double-digit earnings growth.
That said, a forecast price-to-earnings ratio (P/E) of 16 — thanks to a predicted 66% reduction in earnings per share — makes this one to avoid for now. There’s not even a dividend to tide investors over.
On a forecast P/E of just 10 for 2017, shares in Laird might be a more enticing proposition. Although warning that visibility on volumes “remains poor” for its Performance Materials division, the company’s wireless division continues to perform well with Q3 revenues up 58%. Given that this side of the business is involved in providing aerials and systems for the connected vehicle sector (a potentially huge growth market), things could dramatically improve for Laird in the medium term. The £263m debt on its balance sheet is still a concern though.
Shares in Countrywide now trade on a P/E of under 6, making it the cheapest of the three to own. However, those attracted to value will need huge amounts of patience and zeal (not to mention a risk-tolerant nature) with the manner of our departure from the EU still to be officially confirmed. With so many better opportunities in the market, Countrywide still warrants a wide berth.
