In nearly 40 years of investing, I’ve made my fair share of mistakes. Indeed, my three worst investments racked up almost £1m of losses. Then again, life has taught me I can learn more from failure than success. So, what should I do with the worst-performing FTSE 100 share over the past five years?
The Footsie’s biggest flop
Over the last half-decade, the FTSE 100 has risen by 46.5% (excluding cash dividends). However, 36 Footsie stocks have fallen in value over this period.
Looking through this list of losers, I see that my family portfolio owns five of these ‘fallen angels’. Hence, I must be a terrible investor, right? Not exactly, because I bought these shares from 2021 to 2023, following substantial price falls.
That said, I note that my family owns the blue-chip index’s biggest loser of the past five years. This Footsie flop is Persimmon (LSE: PSN), one of the UK’s largest housebuilders. What went wrong for this company (and our shares)?
Persimmon’s plunge
For the record, Persimmon stock is down 19.9% over six months and 18.7% over one year. Over five years, it has crashed 66%, wiping out almost two-thirds of its peak market value. Ouch.
Again, the above figures all exclude dividends. These were once very generous from this British business, which was founded in 1972. For 2021, the yearly dividend was 225p, but this was slashed to 60p for 2022, where it has remained ever since.
At their all-time high, Persimmon shares briefly exceeded £33 in February 2020. But the Covid-19 crisis of 2020/21 placed a wide range of companies under stress, especially construction firms.
Worst still, after years of the base rate being close to zero, the Bank of England started raising it from December 2021. To cool down a rapidly expanding economy, the Bank hiked its base rate from 0.1% a year to 5.25% a year by August 2023.
Thus, what really did for Persimmon were rapid and steep increases in mortgage rates. This made buying a home much more expensive, shrinking the base of potential buyers and hammering the housing market.
Buy, sell, or hold?
As I write, Persimmon shares trade at 1,075.5p, valuing it at less than £3.5bn. This makes the firm one of the FTSE 100’s smallest constituents, putting it at risk of being demoted to the mid-cap FTSE 250 index.
At this level, the shares trade on 12.2 times trailing earnings, delivering an earnings yield of 8.2% a year. This covers the chunky dividend yield of 5.6% a year by almost 1.5 times.
After losing the majority of their value, Persimmon shares may now be in the market’s bargain bin. Certainly, they look far from expensive to me. Also, the group had £117m of cash at hand at the end of 2025 (down from £258.6m at end-2024).
With home sales, sale prices, and revenues on the up, I suspect that this group may have turned a corner. Thus, I have decide to hold onto our beaten-down shares and await developments. As one former boss once remarked to me, “Cliff, when you do nothing, often you do nothing wrong!”
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Cliff D’Arcy has an economic interest in Persimmon shares.
