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Each quarter we get a renewed focus on FTSE 100 again FTSE 250. The underperforming stocks in the FTSE 100 are being downgraded to be replaced by the best performing stocks in the FTSE 250. With one due before the end of the year, there is one FTSE 100 company that I think I will avoid and not get caught. in the price trap.
Recent issues
The stock I am referring to is The Vistry Group (LSE: VTY). I wrote about this company a month ago and signaled that I would not invest as I thought the share price might go down. A month later it was down 34%. In the broader one-year period the stock is down 23%.
A key factor in last month’s decline was another profit warning from its management team. It was already signaling trouble in October, with profit targets downgraded due to underestimating construction costs for projects in the south.
However the business issued another update earlier this month, citing the additional profit impact of the southern news which adds up to £25m this year. It then spills over into a negative impact of £20m in 2025 and £5m in 2026. This takes the total impact to £165m.
Earlier this week (20 November), it was confirmed that its COO Earl Sibley will step down immediately. I expect more changes in senior management in the coming months. Business will certainly want to draw a line under this issue and start over.
Downside risk
Due to share price, Vistry market-cap has decreased. It now stands at £2.07bn. So if the rescheduling was in place now, it would be taken down. For example, in the FTSE 250 there are currently 54 stocks with a higher market-cap! We will have to see Vistry shares rally significantly over the next few weeks to stay in the FTSE 100.
There will be an impact if this happens. For example, FTSE 100 tracker funds will sell Vistry stock and FTSE 250 tracker funds will buy it. But the size of money in the trackers of FTSE 100 is much higher than the one of FTSE 250. So it will have a negative impact overall.
It’s not all doom and gloom
Even if I was right about the stock last month, I’m not going to sit here and say I’ll never buy it. A real estate developer works in a field that I hope for the future. With more interest rate cuts coming next year, I expect mortgage rates to fall and property values to rise.
In addition, the cost issue is something that can be fixed and reinforced with procedures to ensure that it does not happen again. It’s not like this is a serious problem that destroys the entire business model.
So while I’m staying put for now, I’ll be looking out for the Vistry Group in the new year.
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