Selling is part of the investment equation. While these Motley Fool UK writers aren’t quite at that point yet with the shares in question, they remain under the microscope for now…
British American Tobacco
What it does: British American Tobacco manufacturers and sells tobacco products across the globe.
By Charlie Keough. I hold a small position in British American Tobacco (LSE: BATS). And I’ll be keeping the stock on a tight leash over the next few months.
The main reason for this is due to its performance. It’s been a far from pleasing year for the company’s shareholders, with the stock falling by over 20%. In fact, the last five years have seen it lose over 25% of its value.
A host of factors are the drivers behind its decline. However, the most prominent is the falling popularity of the tobacco industry. By some, it’s even predicted smoking could be extinct by 2050.
I do see upsides in the stock. For example, the business has begun to put greater focus on alternative revenue streams to combat the risk of falling sales. More so, with a dividend yield of over 8%, it offers a passive income opportunity.
However, I’ll be watching British American Tobacco’s performance closely for the foreseeable future. Should its poor record continue, I may reassess my position.
Charlie Keough owns shares in British American Tobacco.
GSK
What it does: GSK is a biopharma company, based in the UK, producing vaccines, treatments, and consumer healthcare products.
By Dr. James Fox. Since I invested in UK pharmaceutical GSK (LSE:GSK), the shares have remained flat.
The share price has been suppressed for some time amid concerns around legal action against GSK. US plaintiffs claim that Zantac, a heartburn drug, in some production lines, caused cancer.
Estimates vary as to how much these Zantac lawsuits have and will cost in settlements. However, it’s broadly accepted that the worst possible outcome has been taken off the table.
GSK claims there is no scientific evidence for the claims, and a federal judge has backed them, throwing out tens of thousands of cases in December.
Refocusing on valuation and business prospects, GSK beat expectations in Q2 and lifted its guidance for the year. The stock also looks phenomenally cheap for a biopharma firm, trading at just 9.9 times forward earnings.
However, with concerns about the lawsuit, there’s no momentum. I’m wary it could take a long time before any upside is realised.
James Fox owns shares in GSK.
Persimmon
What it does: Persimmon is the second-largest housebuilder in the UK by certain metrics and is known to be one of the big five developers in the country.
By John Choong. One UK business I own but am keeping on a tight leash are shares of homebuilder Persimmon (LSE: PSN). With the stock trading near multi-year valuation lows after its profits were slammed by higher mortgage rates, it could be an opportunity for me to buy the dip.
There’s a risk sticky inflation keeps rates elevated longer, denting housing demand further. However, Persimmon’s focus on first-time buyers could pay off if rates decline, sparking a rebound in completions and profits. Additionally, I’m optimistic about Persimmon’s vertical integration plans to cut costs and boost margins over the long-term. Plus, the extreme UK housing shortage isn’t going away.
As such, I’m holding Persimmon for its recovery potential. Careful steering is needed, but this beaten-down stock could bounce back strongly once headwinds abate. Nonetheless, the risk/reward balance means that Persimmon stock requires a tight leash for now.
John Choong has positions in Persimmon.
Scottish Mortgage Investment Trust
What it does: Scottish Mortgage is an investment company that aims to identify, own and support the world’s most exceptional growth companies, whether public or private, at a competitive fee for shareholders.
By Harvey Jones. I’ve made two forays into Scottish Mortgage Investment Trust (LSE:SMT) shares this year, once on 30 May and again on 1 August. In both cases, it was against my better judgement.
The UK-listed trust’s share price crashed by half last year after its strategy of chasing whizzy US growth stocks like Tesla backfired horribly. Strangely, it hasn’t recovered this year, even when top 10 portfolio holdings like Tesla and Nvidia were flying. That makes me think that some of its smaller holdings are doing really badly.
Manager Tom Slater has had to answer a lot of hard questions from shareholders about recent poor performance, and I wasn’t always convinced by his answers.
So why did I buy it? In part, because I noticed that when wider sentiment picked up, Scottish Mortgage picked up faster. So I decided it was a great way to play the recovery, except now there is no recovery and its shares are sliding again.
I’m only down 2% or 3% overall, which isn’t bad. When sentiment picks up, I hope Scottish Mortgage follows (at speed). Yet in contrast to another private equity holding, 3i Group, I’m not completely sure management is on the ball. I’ll be watching this one like a hawk.
Harvey Jones owns shares in Scottish Mortgage Investment Trust.
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