Down 25% in a month! Should I buy the 2 worst-performing stocks on the FTSE 100?

The FTSE 100 has had a bumpy ride lately but these two stocks have gone into total meltdown. It could be a buying opportunity.

| 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.

A young black man makes the symbol of a peace sign with two fingers

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

The FTSE 100 is full of solid blue-chip stocks that investors don’t expect to crash 25% in a month but all too often they do. The following two have just taken a severe beating. I love buying bargain stocks, so should I snap them up?

The biggest faller is pest control specialist Rentokil Initial (LSE: RTO), which fell a thumping 29.53% over the last month. That put the wind up me, because I’d been thinking of buying it to benefit from Parisian bedbug mania. Over one year, it’s down 22.34%.

A tough quarter

Back in July Rentokil looked set to clean up, as its interim profits showed revenues soaring 70% to £2.7bn. It was enjoying growth in every region, while demonstrating its pricing power and growing through M&A, and making early progress on integrating its Terminix acquisition.

Should you invest £1,000 in Banco Santander right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Banco Santander made the list?

See the 6 stocks

Created with Highcharts 11.4.3Rentokil Initial Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

North America is now its largest market, which offers a real opportunity, but also brings risk as we saw in its Q3 results, published on 19 October.

Management warned full-year North America performance was set to be “marginally below” previous expectations, as economic uncertainty hit new customer acquisition and revenues rose just 2.2%. Overall revenue growth was much better, up 53.3% to £1.38bn, as Europe and emerging markets compensated. Yet this was still way below H1’s 70% revenue growth. Investors were in an unforgiving mood, amid wider stock market volatility.

A little too unforgiving, in my view. I think this could be a good opportunity for a long-term buy and hold investor like me. However, Rentokil isn’t cheap, trading at 19.81 times earnings, while the 1.78% yield is at the lower end of the scale. With the US economy braced for further interest rate hikes, the Rentokil recovery could take time. Yet I hope to buy it when I have the cash.

Troubled banking sector

NatWest Group (LSE: NWG) is the FTSE 100’s second-worst performer of the last month, down 24% and 20.79% over the year. Banking stocks have had a bad time generally of late, but NatWest took a real beating from the Nigel Farage ‘debanking’ scandal, which cost CEO Alison Rose her job. 

On 27 October it suffered another blow as Q3 profits missed expectations and management was forced to cut its full-year net interest margin outlook.

Created with Highcharts 11.4.3NatWest Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Banks were supposed to benefit from rising interest rates, which should allow them to widen the gap between what they pay savers and charge borrowers. Instead, they’ve been squeezed by competitive savings and mortgage markets. Windfall tax threats haven’t helped. Plus there is the danger of rising bad debts, if house prices crash.

FTSE 100 banks are trading at rock-bottom prices, despite reporting billions in profits every quarter. NatWest trades at just 4.88 times earnings. It’s forecast to yield a whopping 9.65% this year, and 9.66% in 2024.

To me it looks like a fantastic buying opportunity. The problem is that the banks have looked great value for several years, only to lurch from one disappointment to another. I already hold a big position in Lloyds Banking Group. NatWest probably has greater bounce-back potential but I have enough exposure to this troubled sector.

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group 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

Blue NIO sports car in Oslo showroom
Investing Articles

Tesla’s struggling. Could NIO stock benefit?

NIO stock has moved up very slightly this year, while Tesla has crashed. Our writer considers whether it might be…

Read more »

Two employees sat at desk welcoming customer to a Tesla car showroom
Investing Articles

Could Tesla stock be a brilliant bargain in plain sight?

Christopher Ruane sees some things to like about Tesla, but as its vehicle revenues have gone into sharp decline, is…

Read more »

British coins and bank notes scattered on a surface
Investing Articles

3 cheap FTSE 250 stocks with big dividends to consider buying right now

The FTSE 250's loaded with so many big dividend yields it's hard to know where to start. These three have…

Read more »

Rolls-Royce's Pearl 10X engine series
Investing Articles

Up 585%, could Rolls-Royce shares still go higher?

Christopher Ruane likes the Rolls-Royce business but is not so convinced by the value its current share price offers him.…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

I reckon a bull market’s coming! Here’s what I’m buying for my Stocks and Shares ISA

Hoping to capitalise on what he believes is an undervalued UK stock market, our writer’s added more of this FTSE…

Read more »

piggy bank, searching with binoculars
Investing Articles

The UK stock market looks undervalued to me. Here’s 1 growth stock to consider for a SIPP

Our writer explains why he thinks the UK stock market’s currently in bargain territory, and identifies one share potentially worthy…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

Meet the FTSE 100 stock I’ve been buying this week

Despite a strong week for the FTSE 100, one stock fell 7% in a day. And Stephen Wright took the…

Read more »

Businesswoman calculating finances in an office
Investing Articles

1 of my favourite growth stocks crashed 20% in a day this week. Here’s what I’m doing

Stephen Wright thinks the market’s overreacting to short-term growth challenges in one of his favourite UK stocks, creating a buying…

Read more »