Growth stocks are supposed to deliver excitement and reward patience. But right now, five are stinking out my Self-Invested Personal Pension (SIPP). So let’s name and shame them: Diageo, JD Sports Fashion (LSE: JD), Glencore, Ocado Group and Aston Martin.
I bought them accoss 2023 and early 2024 while consolidating three old pensions into a single pot. My SIPP contains 20 UK stocks and has done well overall, thanks to a steady stream of dividends and some big winners that have doubled in value. But these five have been dead weight.
Glencore‘s down 25% over the last year, Diageo -27%, and JD Sports -30%. Ocado has slumped 45% and Aston Martin has tumbled nearly 55%. These last two have plunged into the FTSE 250.
So what went wrong? And should I cut my losses?
These UK shares smell bad
Diageo’s once-reliable premium spirits business has hit a rough patch, with sales slowing in key markets such as the US and Latin America.
Inflation has made high-end brands harder to shift, while China’s post-Covid reopening hasn’t sparked the hoped-for recovery. The shares look tempting at today’s lower price, but I’m not expecting a quick shot of growth.
Commodity stocks rise and fall with the global economy and, right now, Glencore’s on the wrong side of that cycle. The slowdown in China has hit demand for key materials while its successful coal business is under fire from net zero campaigners. The stock could bounce back when economic sentiment improves but, for now, it’s a waiting game.
I had doubts about Ocado Group even when I bought in, but the dream of a tech-driven logistics powerhouse was too enticing. As yet, its partnerships with global supermarkets haven’t delivered the expected returns, although Ocado Retail is picking up. I can see a scenario where Ocado turns things around, if I use binoculars.
I bought Aston Martin despite its messy financials, eye-watering debt and bumpy history. The latest models look fantastic, but the company still needs to prove it can operate profitably. Right now, I’m not convinced.
JD Sports is a real pain
Of the fateful five stinkers, JD Sports hurts the most. I had high hopes, and even averaged down as the price dropped. But it’s been a disaster. The company’s ambitious US expansion is backfiring, with the American economy struggling and trade tariffs threatening footwear imports. British consumers aren’t feeling much richer either, which doesn’t help.
JD Sports has a solid business model. It dominates the UK sports retail market and its brand is strong. But the barely-there 0.77% yield makes recent struggles even harder to bear. My faith in the recovery’s fading, but I’m not selling.
The JD Sports share price now looks brilliant value with a price-to-earnings ratio of just 6.4. When sentiment shifts, I think the share price could fly. As with all of these stocks, I’m willing to put up with the stink a while longer.
Aston Martin and Ocado could take years to recover, if they ever do. And while JD Sports, Glencore and Diageo have clearer paths to a rebound, there are no guarantees. For now, I’ll hold my nose and wait. And pick my growth stocks more carefully in future.
This post was originally published on Motley Fool
