The last 10 months or so have been pretty dire for UK investors. And while I still firmly believe that the best time to load up on FTSE stocks is when there’s more than a whiff of fear in the air, I also think there could be more pain to come for some.
That pain could come in November.
Howdens Joinery
One FTSE stock that could have a difficult month is kitchen supplier Howdens Joinery (LSE: HWDN).
Now, I’m actually a fan of this company. It’s a big player in its market and has a history of generating above-average returns on the money it puts to work.
Unfortunately, it’s easy to overlook these qualities in the current climate. With inflation running high and a housing market now treading water, demand must surely have softened over the summer. We’ll find out when it reports on recent trading on 3 November.
The question is, how much of this is already priced in? Well, the near-halving of Howden’s share price in 2022 would suggest quite a bit. Interestingly, there also seems little interest from short sellers as things stand. This suggests that expectations might actually match reality. If so, there’s no guarantee that we will see another drop next month.
That said, I’m prepared to wait for the numbers before deciding whether to strike.
Marks and Spencer
Interim results from Marks and Spencer (LSE: MKS) will be published on 9 November. Like Howdens, its stock has tanked in value year-to-date.
I can’t say I’m surprised. Having almost overcome the challenge of shaking its tired image, the tightening of purse strings is another hurdle for the business. News that inflation returned to double-digits in September is hardly an encouraging development. A recent update from Ocado (its joint venture partner in the UK), and the reaction to it, don’t bode well either.
On the flip side, the shares look cheap, changing hands at a price-to-earnings (P/E) ratio of a little less than seven. One might also argue that M&S stands to benefit from fewer people eating out but perhaps spending a little more on eating in. And, no, I don’t believe every M&S shopper has suddenly migrated to shopping at a German discounter for their groceries.
Even so, I can’t see a catalyst for a recovery to begin in November. For this reason, I’m happy to watch from the sidelines.
AO World
Down 57%, as I type, electrical goods seller AO World (LSE: AO) has been another big casualty in 2022.
With interim results out on 22 November, I just can’t see how management has been able to turn this still-not-consistently-profitable business around. Like M&S, AO operates in a hyper-competitive environment. And while white goods and gadgets need to be replaced from time to time, many people will avoid doing so in a recessionary environment unless completely necessary.
It seems I’m not alone in being bearish. Broker Canaccord Genuity currently has a ‘sell’ rating on the stock with a target price of just 31p. It’s currently 45p.
Management is clearly trying. The decision to leave the German market and concentrate on the UK, while overdue, does make a lot of sense.
Even so, I still can’t see the attraction of me investing here. They don’t make bargepoles long enough.