2023 was a mixed year for the UK’s FTSE 100 index. While some stocks within the index soared, delivering strong gains, others tanked, producing nasty losses.
In this article, I am going to highlight five of the worst-performing FTSE stocks last year. While buying last year’s losers is not guaranteed to pay off, I think these five stocks all have the potential for a decent rebound at some stage in the not-too-distant future.
Diageo (LON:DGE)
First up is alcoholic beverages giant Diageo’s share price, which fell around 22% in 2023.
The main reason the Diageo share price slumped last year was a tougher consumer environment. After several years of high disposable income during the pandemic, consumers tightened their belts in 2023 on the back of the rise in global interest rates. This led to lower demand for Diageo’s spirits, particularly in the Latin America and Caribbean markets.
Now, this economic backdrop could persist for a while. While interest rates have probably peaked, we may not have fully seen the lagged effect of higher rates kick in yet.
However, eventually, I expect the consumer backdrop to improve and Diageo’s sales growth to pick up again. Lower interest rates should help. These are likely to lead to more disposable income globally.
One thing Diageo has going for it is that it’s a major player in the tequila space (it owns both Don Julio and Casamigos). And tequila sales are booming. At present, tequila is the fastest-growing spirits category worldwide.
With the stock currently trading at levels it was at in 2018 and 2020, on a forward-looking price-to-earnings (P/E) ratio of 16.8, I think there’s potential for a rebound.
Prudential (LON:PRU)
Up next is Asia- and Africa-focused financial services company and the Prudential share price. It also fell around 22% for the year.
Prudential shares actually started 2023 well. That’s because there was a lot of optimism over China’s Covid reopening. However, when it became clear that China was not experiencing the same kind of reopening as Western economies did, Prudential shares began to slide, and the downtrend continued all year.
There’s no doubt that China’s economy is a bit of a mess at the moment. However, I do think there’s potential for a turnaround. And it’s not just about China here. Across other areas of Asia, and Africa, demand for savings and insurance products remains high (Prudential’s H1 2023 results showed double-digit growth across 15 of its life insurance markets).
As for the valuation, it looks attractive. Currently, Prudential has a forward-looking P/E ratio of less than 10. At that earnings multiple, there’s plenty of scope for a re-rating.
It’s worth pointing out that Citigroup has a share price target of 1,350p here. That implies upside of over 60%.
- Interested in trading FTSE shares? See our comparison of the best FTSE 100 trading platforms.
Burberry (LON:BRBY)
Another FTSE 100 stock that was hit by China’s economic woes in 2023 was luxury brand Burberry’s share price. For the year, it registered a share price fall of about 30%.
China accounts for around one fifth of global luxury goods spending. So, its economic challenges are obviously a concern here. Eventually, however, spending across the world’s second-largest economy is likely to pick up. And when it does, I think Burberry’s sales, and share price, could get a boost.
Looking at Burberry’s valuation, there appears to be some value here. At present, the stock has a forward-looking P/E ratio of just 12.8. That strikes me as low. This is a high-quality Footsie company with a strong brand, solid long-term growth prospects (thanks to rising wealth in the emerging markets), a robust balance sheet, and a high level of profitability.
And with the dividend yield of around 4% at present, investors are being paid to wait for a turnaround.
Vodafone (LON:VOD)
Turning to the Telecommunications sector, we have Vodafone’s share price . Its shares fell around 19% for the year.
One driver of the share price fall here was worries in relation to debt. At the end of September, net debt stood at €36 billion, which is not ideal in a rising-interest-rate environment.
Another was concerns over a dividend cut. Given the large debt pile, Vodafone’s high payout is beginning to look unsustainable.
Now, while the debt pile here is a risk, this may be factored into the stock already. At present, the forward-looking P/E ratio here is just nine.
One broker that sees value at current levels is Deutsche Bank. In a research note published in October, it put a 165p price target on Vodafone (implying upside of around 140%), stating that many of the telecoms company’s recent challenges (higher energy costs, emerging market currency pressures, etc.) are most likely nearing an end.
St. James’s Place (LON:STJ)
Finally, we have the wealth management group St. James’s Place share price. It fell around 39% for the year.
St. James’s Place is facing a range of challenges right now. Not only have Britons been investing less due to the cost-of-living crisis, but the company has come under pressure from regulators for its fee structure (the FCA has been pushing the group to align its fees with the new Consumer Duty regulations).
If the company can sort out the regulatory issues, I think there’s potential for a rebound here. Looking ahead, demand for trusted, face-to-face financial advice is likely to remain robust due to the fact that the financial environment is so complex. And as global stock markets rise over time, the company’s fees should rise.
After last year’s share price fall, St. James’s Place shares are currently trading near 10-year lows. And the valuation and yield are attractive. Currently, the stock has a P/E ratio of under 10 and a yield of around 7.4%. Looking at those numbers, I see some value on the table here.
Edward Sheldon owns shares in Diageo and Prudential
Based in London, Edward is a distinguished investment writer with an extensive client portfolio comprising a diverse array of prominent financial services firms across the globe. With over 15 years of hands-on experience in private wealth management and institutional asset management, both in the UK and Australia, he possesses a profound understanding of the finance industry.
Before establishing himself as a writer, Edward earned a Commerce degree from the prestigious University of Melbourne. Complementing his academic background, he holds the esteemed Investment Management Certificate (IMC) and is a proud holder of the Chartered Financial Analyst (CFA) qualification.
Widely recognized as a sought-after investment expert, Edward’s insightful perspectives and analyses have been featured on sites such as BlackRock, Credit Suisse, WisdomTree, Motley Fool, eToro, and CMC Markets, among others.
