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Although the UK stock market has performed well so far this year, not all UK stocks have. Some companies have really struggled in 2024 and the damage may not have been done. I need to be aware that I can be drawn to certain ideas that may appear to be good buys. Here are two on my list to stay away from.
Lacking a unique angle
The first one is CAB payments (LSE:CABP). The stock is down 45% in the past year, after a massive share price crash nearly a year ago.
Late last year, the stock fell more than 70% a day after the business issued a financial warning. The global payments provider revised its revenue expectations down, marking that “Market conditions are squeezing margins and reducing trading volume”.
If we take a quick look at the H1 results that came out last month, the situation doesn't seem much better. Adjusted earnings came in at £18.7m, down from £40m from the same period in 2023. The company commented. “low revenue and high operating costs”.
I just don't see how the payment company is different in what they offer. Admittedly, it can carve out a niche in making payments in emerging markets. This can help the business to grow in the future. But in my opinion there are a lot of hurdles that need to be overcome before I can think of investing.
Productivity levels drop
Another company I'm worried about Ferrexpo (LSE:FXPO). The stock is down 41% over the past year and down 85% over the past three years.
This is sad news, as iron ore producers in Ukraine have seen production levels drop since the Russian invasion. In the latest quarterly report, it noted that only one to two of the four lines were operational during that period. In addition, it has nearly 700 employees currently working in the military, and they are putting pressure on production capacity.
I hope that the war will end peacefully at some point. However, I see no immediate signs of this. Therefore, I expect that Ferrexpo will continue to struggle, with production and revenue likely to decline significantly next year.
It also never helped the steel price drop. At the beginning of this year it was trading at $133 per ton, but now it is at $105. This means that whatever Ferrexpo produces is ultimately sold at a lower price than it would have been on the open market.
I could be wrong here and if we get an unexpected peace deal then Ferrexpo's shares could rally on good news. Performance levels can jump materially in a very short period of time, helping to increase revenue. However, I am happy to stay with this one.
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