In contrast to the FTSE 100, our more UK-focused FTSE 250 hasn’t been in scintillating form. As I type, the mid-cap index is now in negative territory for the year to date. At least some of this lacklustre performance has been down to a number of its constituents hitting 52-week lows.
While such a situation normally gets my contrarian instincts firing, there are at least two growth stocks I’m definitely steering clear of.
Lovely cars, awful investment?
The vehicles made by the luxury car company Aston Martin Lagonda (LSE: AML) are beautiful to look at. I’m sure they’re just as beautiful to drive. Having helped James Bond save the world countless times, the firm is a household name (at least in very affluent households).
As an investment however, it remains an absolute dog. In fact, that’s an insult to dogs. Ridiculously overpriced when it came to market back in October 2018, it’s been a textbook example of value destruction.
Yet another loss
On Wednesday (26 February), management revealed another poor set of full-year numbers to the market. An adjusted pre-tax loss of £255.5m was recorded for 2024, far worse than the already-awful £171.8m loss for 2023.
There’s a chance that things could get even worse. The threat of US tariffs by Donald Trump, supply chain disruptions and falling sales in China could all conspire to drive the shares even lower. As things stand, the market is already sniffy about a lower-than-expected guidance on production in 2025 and the firm’s decision to delay the launch of its first electric car.
With debt levels only going in one direction (and not the one investors would like), I’m more concerned than ever that Aston Martin Lagonda is slowly, painfully running out of road. Bankrupt seven times in its 112-year history — what price eight?
For now, job cuts will help to ease the financial burden. The ongoing presence in F1 will also maintain brand awareness.
But the road back to health looks long and painful.
Once loved, now hated
Another FTSE 250 firm I’m avoiding is Ocado (LSE: OCDO). It shares are already down 16% in 2025, making the e-commerce, fulfilment, and logistics player another one of the index’s big losers.
To be fair, anyone owning a stake when the Covid-19 pandemic first began would have been handsomely rewarded up to around February 2021. Back then, the explosion in ordering groceries online played right into management’s hands. The stakes of early investors duly multi-bagged in value.
Even so, I remember writing at the time that this sort of performance wasn’t sustainable. Ocado simply wasn’t making any profit. And that situation has changed in the years since.
All that glitters…
I’ve never doubted that Ocado’s tech is impressive. But a great product does not necessarily make for a great investment, especially if expectations overtake reality.
It’s positive that the firm has already inked quite a few contracts with prominent retailers for its automated warehouses. If these sites can be rolled out at a faster rate, there’s hope. In the meantime, the debt pile is steadily growing.
Yet with interest from short sellers remaining high (indicating that at least some believe the shares have further to fall), there’s no way I’m getting involved.
This post was originally published on Motley Fool
