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I wish I’d never bought these 2 FTSE 250 shares!

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So far, 2023 has seen a positive start for global stock markets. The FTSE 100 is up 5.5% this year, while the FTSE 250 is ahead 6%. In the US, the S&P 500 has gained 6.3%, while the tech-heavy Nasdaq Composite index has leapt by 12.6%.

Two FTSE flops

Not all shares have done well lately. For example, in the second half of last year, my wife and I bought three FTSE 250 shares for our new family portfolio. Unfortunately, two of these stocks turned out to be flops.

Flop #1: Direct Line

While working in the financial sector from 1987 to 2002, I greatly admired Direct Line Insurance Group (LSE: DLG), its business model and its management.

This well-known insurer, founded in 1985, used technology to disrupt the market for UK motor and home insurance. Today, it also sells business, life, pet, and travel insurance.

In June 2022, my wife bought shares in this firm at 200.3p. For a while, the shares climbed. Alas, the stock crashed on 11 January, plunging 23.5% after the group suspended its cash dividend in order to strengthen its balance sheet.

This move went down badly with shareholders, with CEO Penny James departing on 27 January. Here’s how the Direct Line share price has performed over various periods:

Current price 179.65p
52-week high 312.7p
52-week low 161.95p
One day -2.3%
Five days -2.4%
One month -22.7%
Six months -17.7%
One year -41.4%
Five years -53.4%

With the shares down more than two-fifths in 12 months, it’s no surprise DLG’s boss fell on her sword. Also, the five-year price decline of more than half relegated Direct Line from the FTSE 100 to the FTSE 250, where it remains.

We invested in Direct Line for its bumper dividend yield, but this cash payout has been withdrawn. Also, with bad-weather claims soaring since December’s icy blast, the group’s earnings guidance has been scrapped.

Despite the dividend being cancelled, my wife and I will keep this struggling stock for now. In a couple of years, things could be much rosier for Direct Line. And we did buy it for its long-term potential, not its short-term volatility.

Flop #2: International Distributions Services

International Distributions Services (LSE: IDS) is the new name for Royal Mail Group. However, I really dislike this clunky new moniker for the 507-year-old household name.

I’m also rather annoyed with IDS’s management team. Since August 2022, postal workers have staged 18 days of strike action to win better pay and working conditions. This has delivered a £200m hit to group profits, yet there seems to be no negotiated agreement in sight.

While letter deliveries are in long-term decline, the company’s international logistics business (GLS Group) is doing well. But until IDS directors and union leaders agree a new pay deal, GLS’s success is being undone by Royal Mail’s troubles. Group full-year losses could be £350m to £450m. Ouch.

At the current share price of 234.4p, this FTSE 250 stock has crashed 46.8% over one year and 57.2% over five years. But the share price is almost 35% above its 52-week low of 173.65p on 14 October (and 10% up in 2023). So we’ll stick with these weakened shares for now, despite our concerns over the IDS management team!

The post I wish I’d never bought these 2 FTSE 250 shares! appeared first on The Motley Fool UK.

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Cliff D’Arcy has an economic interest in Direct Line Insurance Group and International Distributions Services shares. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.