I’m keen to add a few FTSE 250 shares to my portfolio of mostly FTSE 100 stocks, but I’m wondering where to start. So I decided to ask ChatGPT.
Artificial intelligence (AI) is going to be running our lives soon enough, I’m told. So why not let it run my portfolio today?
Actually, there are reasons. ChatGPT’s first pick was Warhammer-maker Games Workshop. It exited the FTSE 250 on 5 December, and now resides in the FTSE 100. Oh well. Even robots aren’t perfect.
So I asked ChatGPT to give it another shot. I must have annoyed my AI chum because it plumped for online fashion retailer ASOS (LSE: ASC). Now that was a brave call!
By brave I mean mad. ASOS? Really? Of all the stocks on the FTSE 250, I didn’t expect that.
If AI does own the future, it’s going to be volatile.
ASOS is a high-risk play
ASOS could be the ultimate falling knife. Online fashion retail hope turned fashion victim. And AI would buy it in a heartbeat? Just be grateful it doesn’t have a heart. Yet.
The ASOS share price is down 88% over the last five years. Trading at 385p, it’s back down to 2009 levels.
This is a perfect storm of a stock, hammered by everything from the cost-of-living crisis to tough competition from Chinese-owned fast fashion rival Shein, which forced it to offload piles of unsold stock at a discount.
In full-year 2023, losses hit £296.7m. That increased to £379.3m in 2024, while group revenues slumped 16% to £2.9bn. CEO José Antonio Ramos Calamonte still claimed to have hit his key priorities by reducing inventories and “generating positive adjusted EBITDA and free cash flow”.
Sales were up too and ASOS still boasts 20m customers, he added. But forget Calamonte. He’s only the boss. What does AI think?
ChatGPT admires the group’s “strong online presence” while praising its “robust e-commerce platform that appeals to a global customer base”. That line could have been written by a computer. Oh, it was.
As was the bit about how ASOS’s international expansion plans could “diversify revenue streams beyond the UK”. Where is it nicking this stuff from? And why didn’t it mention the mothballed £110m fulfilment centre in Lichfield?
The worst may be over
In its defence, ASOS shares have stopped falling. In fact, they’re actually up 2.62% in the last year. Is this the long-awaited recovery?
The shares got a small boost on 2 February when two credit insurers reinstated cover for its clothing suppliers, withdrawn in 2023 due to concerns over profits. This suggests ASOS has greater financial stability.
ASOS has also made some progress in addressing its inventory challenges. It’s halved unsold stock and transitioned to a more agile ‘Test and React’ model. This should help it respond swiftly to new trends, driving full-price sales and boosting margins.
Selling its 75% stake in the Topshop and Topman brands for £135m will boost liquidity and allow management to focus on the core business. So maybe ChatGPT hasn’t gone haywire.
After its terrible run, ASOS is back on my radar. But with consumers still strapped for cash and inflation sticky, there’s no way I’m going to buy it today.
I’m mad enough to request stock tips from a computer. Not mad enough to act on them.
This post was originally published on Motley Fool
