It’s no surprise really that the worst-performing assets in my portfolio are not FTSE shares at all but US tech stocks. Since early August, recession fears have sent some US stocks spiralling and the bubbling tech industry’s been the hardest hit.
What’s it they say about the bigger they are, the harder they fall?
Tech stocks aside, the UK’s actually been doing quite well. Seven of my 10 top-performing stocks are well-known UK companies such as Barclays, Marks & Spencer and Greggs. But there are two that have been hurting my bottom line for some time now — and I don’t how much more pain I can take.
The offenders are easyJet (LSE: EZJ) and BP (LSE: BP).
Crash landing
My easyJet shares have been in the red for so long that I can’t remember if they were ever in profit. Early 2023 promised a recovery but that promise landed in a different country! The same occurred during the 2023/224 holiday period — engines revved for take-off but, ultimately, it was a false start.
I want to believe, I really do. But it feels like I’ve been left at the boarding gate. Ok, that’s the last airline analogy.
easyJet returned to profit this year and its prospects are looking up. Its price-to-earnings (P/E) ratio’s 10.3 which leaves decent room for growth. And it’s already climbed 20% since its Q3 update in late July which revealed an 11% rise in revenue and pre-tax profits up to £73m from £49m last year.
So after all this time, might I see some profit? Quite possibly. Last week, both UBS and Bank of America put a Buy rating on the stock. I’ve waited this long, I can hold the shares for a bit longer.
But there’s a risk. Falling fuel prices probably helped the recent recovery. If that changes, the share price could drop again.
Which brings us to stock number two.
The oil giant
BP (LSE: BP) was actually doing okay until recently. By early 2023, it had recovered all its Covid losses. But in the past six months, the shares have plummeted 20%. Unlike easyJet, there’s no sign of an imminent recovery.
Shell has suffered a similar fate but, fortunately, I sold those shares in July.
Naturally, the falling price has followed a global decline in oil prices. In its Q2 results, both revenue and earnings per share (EPS) missed analyst expectations and it posted a net loss of $129m.
There’s some expectation that earnings will increase from here, which gives the stock a forward P/E ratio of 8.1. That’s relatively promising but even then, it only brings it in line with the current industry average.
The main reason I’m still keen to hold the shares is the 5.8% dividend yield. With EPS almost double the 24.9p dividend, it’s unlikely that payments will be interrupted in the immediate future. Of course, if falling oil prices drag the shares down too far it will negate any dividend gains. That’s something I’ll need to keep an eye on.
So for now, I’ll keep the faith and I’ll hold my BP shares too. But I think some of those US tech stocks might need to go.
