With the New Year just around the corner, it’s time for traders to begin considering what 2018 has in store.

In our last publication (Santa Rally, 5 November) we highlighted the phenomenon of window dressing by some fund managers – the process of cutting underperforming stocks in order to make portfolios appear more attractive to prospective 2018 clients.

On the other side of the card, however, is the idea that managers attempt to identify undervalued stocks at the start of the new year in order to tap into their ‘recovery potential’ and register strong returns.

With that in mind, we’re analysing the 12 worst performing stocks on both the UK 100 and year-to-date (YTD) and assess which have the best recovery potential heading into 2018.

Why have these stocks been losers in 2017?

Whilst there are a multitude of factors that have caused these stocks to have such a torrid year, the high number of large cap stocks underperforming on the UK 100 and industry stalwarts on the 250 suggests a poignant change in demand patterns.

BT, the worst performing UK 100 stock this year, announced a shock profits warning early in 2017 after accounting malpractices in its Italian division. However, this underperformance has continued throughout 2017, seeing shares trade at 4-year lows.

On the , a different theme emerges.

The majority of stocks highlighted have suffered a string of profits warnings over the year, with the failure to restructure the business effectively causing companies to announce two or even three warnings.

Furthermore, the two worst performing stocks, Provident Financial and Dixons Carphone, were both UK 100 stocks at the start of the year. Dixons was the first to leave, being demoted after failing to recover following June 2016’s Brexit vote, while Provident saw multiple profits warnings wipe almost 80% from the company’s market capitalisation.

Are these stocks set to recover in 2018?

There are several reasons that some of the worst performing UK 100 and 250 stocks could see a share price recovery over the next 12 months.

In the case of the UK 100 , many of the names languishing at the bottom of the performance tables are multi-billion pound stalwarts of the UK market.

A slow reaction to changing market trends in key areas of their industries has culminated in share prices performing poorly over the course of the year.

However, many of these companies have historically delivered a high dividend to maintain interest in the company’s shares despite relatively uninteresting share price movements in the long run.

While their share prices may have turned south, the universal and long-standing appeal of these dividend payments means they have been protected on the most part by the companies to maintain interest.

Can these companies put the plight of 2017 firmly behind them to start the new year on the front foot?

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