I bought these 3 FTSE shares. They crashed. What now?

Over the past seven months, my husband and I have been building a new stock portfolio. We bought 17 different companies: six US stocks and 11 FTSE 350 member. Unfortunately, three of these purchases have been disappointing so far.

FTSE failure #1: persimmons

The biggest paper losses in our recent portfolio came from property developers persimmon (LSE: PSN). We bought this stock in July for its double dividend yield – one of the highest in London. We paid 1,856p for each share, buying long after the price had fallen from its 2022 high of 2,596p.

But with rising inflation and rising interest rates, this FTSE 100 flop straight down. At a 52-week low on October 12, it fell to 1,113.5p. The share price started to rebound and closed at 1,373.5p on Friday, down 26% since we bought it. Also, the stock is down 46.5% in a year.

With storm clouds gathering in UK property prices, Persimmon expects to cut its dividend this year. Personally, I expect less than half of the previous year’s full payout of 235p a share. The investment lesson for me here is that high dividend yields often come with high risk. Unfortunately, I am still attracted to the very high yielding FTSE 350 stocks at the moment.

Faller #2: International Distribution Services

International Distribution Services (LSE: IDS), formerly Royal Mail Group, is a 507-year-old UK universal postal service provider. In mid-2022, we bought into IDS at a share price of 273.2p. At a 52-week high, the stock peaked at 493.8p on 20 January 2022. It has been almost entirely downhill since then.

Repeated industrial action at Royal Mail has plunged group profits. And a cyber attack that prevented the group from sending shipments abroad was another setback. At a 2022 low, the stock fell to 173.65p on October 14.

On Friday, the FTSE 250 stock closed at 221.3p, down 19% from its purchase price. This makes International Distribution Services the second biggest loser in 2022-23. Also, this popular stock fell by more than half (-53.3%) in one year.

I admit that I am very optimistic about the company’s prospects in 2022-23. But the jewel in the company’s crown is GDS, the international delivery group that still thrives. Thus, I expect a reasonable dividend from this stock in 2023, but it may decrease. The lesson here is not to buy companies with legacy staffing problems.

Lose #3: Jump Line

Our portfolio’s third biggest losers are FTSE 250 companies Direct Line Insurance Group (LSE: DLG). We bought into this insurance giant at the end of July for 200.3p per share. At a 52-week high, Direct Line shares peaked at 312.97p on 20 January 2022. Again, the stock had fallen significantly before we got the stock as a potential stock.

Unfortunately, January 11 profit warning sent this stock plunging by 23.5% today. This turned our position from a modest profit to a corresponding loss. On Friday, the stock closed at 173.65p, down 13.3% on its purchase price (and has fallen 43.6% in a year).

The final lesson here is the power of diversification and long-term thinking. Despite these three big losses, our new portfolio is still profitable, thanks to better cash dividends and constituents. Finally, we intend to hang on to all three ‘fallen angel’ stocks until the outlook improves. Fingers crossed!