3 FTSE 250 stocks I wouldn’t touch with a 10-foot pole
- The FTSE 250 index has crashed hard in the past few months.
- It has underperformed the FTSE 100 index by far.
- Carnival, Aston Martin Lagonda, and Royal Mail are high-risk stocks.
The FTSE 250 index has had a tough performance in 2022. As I wrote in my FTSE 100 article, this performance is due to a combination of factors like Brexit, high-interest rates, and soaring inflation. While some FTSE 250 constituents like Energean, Drax Group, and Beazley have performed well, most of them have not. So, here are some of the top stocks in the index to avoid.
Carnival (LON: CCL) is the biggest cruise company in the world with a market cap of over 12 billion pounds. The firm operates 23 ships that sail around the world. Like its competitors, Carnival has had a tough few years as the highly profitable industry was deemed as non-essential.
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Now, the company is in a recovery mode as most countries ease their Covid-19 rules. Indeed, the most recent results showed that the company’s bookings had more than doubled. It said that its bookings were nearly double in the same period in 2019.
However, Carnival shares have not performed well. They have crashed by almost 50% this year alone as concerns about demand and high cost of doing business remain. With interest rates rising, investors are worried about its debt. The company has over $29.6 billion in long-term debt that it could struggle to service in the coming months.
Royal Mail (LON: RMG) has emerged from being a Covid-19 winner into a post-Covid loser. The shares have dropped by more than 50% this year and by 56% from its highest point in 2021. This performance happened after the company’s demand crashed as e-commerce sales waned. In its most recent statement, the company warned that it will make a loss this year.
At the same time, the company has faced numerous challenges as staff have demanded higher wages. As such, there is a likelihood that the stock will continue falling in the coming months.
Aston Martin Lagonda
Aston Martin Lagonda (LON: AML) has been one of the worst-performing stocks in the FTSE 250 index. The shares crashed as investors react to the slow revenue growth and supply chain disruptions. It also crashed after the company came under severe cash shortage that pushed it to raise cash. In September, the company decided to raise cash in an underpriced rights issue. Saudi Arabia also became an investor.
Therefore, Aston Martin Lagonda faces numerous challenges going forward that could push the stock much lower.