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I like to keep my heart open when it comes to UK stocks, but there are some who instinctively worry about me, including these two. FTSE 100 giant. I don’t own it either, but I was sometimes seduced. Thankfully, I did not seal the deal.
One of my eye-catching names is Global Advertising and Media Group WPP (LSE: WPP). It’s under pressure since founder Martin Sorrell ird left under the cloud in 2018. The stock has lost 28% of its value over the past year and is currently trading at its lowest level in 10 years.
I’m afraid of WPP stock price
I was seduced because the stock looked cheap, the price and return rate was around 10.5 and it offered a juicy subsequent yield of 7.5%. This is one of the best in the entire FTSE 100. This profile fits many of my recent stock purchases, but I need to draw a line here.
In addition to its own failure, WPP has also become a deep market change and mercy. The most pressing thing is artificial intelligence. Outgoing CEO Mark Read recently confirmed AI IS “It completely disrupts our business.”. This is a note that I’m worried about my boss going to finish.
AI tools allow businesses to generate creative content in-house, potentially reducing demand for traditional media agencies. WPP was an early adopter of technology, but I’m not sure it could stay ahead of the curve.
Revenues to France have already lost its crown as the world’s largest advertising company publicis. Now it faces new pressure from a continuing $132.5 billion merger between US rivals Omnicom and Interpublic Group.
WPP is not a free fall. The first quarter results released on April 25 showed revenues were reported to be just 0.7% lower at £3.24 billion, down 5%. However, the direction of travel remains unknown and prefers to avoid businesses during an existential transition. Once appointed, a new CEO must do it right.
Vodafone sharing also causes me
Other stocks I’ve been avoiding for a long time are Vodafone (LSE:VOD). I have written about telecom giants for over 15 years, and while their thick dividends often seduced me, the relentless decline in stock prices keeps me at arm length.
There’s a reason to be more positive today. CEO Margherita Della Valle’s conversion plan has made more noticeable advances than previous efforts, with Vodafone’s share price rising 7% over the past year.
Yes, dividends were halved in March, but the stock still offers a solid 5.1% successor yield.
Full-year revenues rose 2% to 37.4 billion euros, and sentiment was relieved by an additional 2 billion euros of share buyback. The three mergers with Vodafone UK will need to unlock operational benefits.
But this is still a cruelly competitive sector. Vodafone faces margin pressure from its low-cost rivals across its major markets. And in 2024, net debt fell by 1.08 billion euros, but still owes 22.4 billion euros. It’s a serious baggage as interest rates have proven sticky.
Despite investing 2 billion euros, Germany will still need to continue pumping billions of dollars into its 5g and fiber infrastructure while it is still struggling.
Vodafone shows signs of life, but like WPP, it doesn’t get too close to your portfolio.
