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The FTSE 100 has a reputation for being a stable and secure market index. After all, while most indexes like the S&P 500 and FTSE 250 were in freefall during the 2022 resurgence of inflation, the FTSE 100 continued to climb upward.
However, that doesn’t mean every UK large-cap stock is a safe bet. In fact, there are plenty of risky businesses among the ranks that investors may need to carefully consider in 2025. And according to the latest expert commentary, the five riskiest businesses in order of market cap right now are:
- Diageo (LSE:DGE) – £43.3bn
- Glencore – £37.8bn
- Bunzl – £7.5bn
- JD Sports Fashion – £4.6bn
- WPP – £4.6bn
Just because a stock is risky doesn’t mean it should be completely avoided. In fact, investing in risky enterprises can lead to transformative gains, as was most recently the case with Rolls-Royce back in 2020. Investors who bought into the new leadership’s vision have earned more than a 1,000% return in the space of five years!
With that in mind, let’s take a closer look at the largest business on this list – Diageo.
Where’s the risk?
A quick glance at Diageo’s share price chart shows that something isn’t quite right with this business. Since its peak in 2022, the alcoholic beverage producer has seen more than half of its market cap wiped out. And that’s recently resulted in yet another change of leadership.
Beyond investor concerns of strategic direction, persistent inflation and weakening demand have ultimately led to a slowdown in growth as well as profit warnings. Throw in the latest disruptions from tariffs and the threat of new trade wars, and the pressure on Diageo’s margins is only rising.
Combining all these factors has unsurprisingly resulted in rising scepticism from the investing community. So much so that the stock is now considered to be a high-risk investment.
A hidden opportunity?
Often, some of the best stock market bargains can be found where no one else is looking. And following the massive sell-off, Diageo shares are now trading at an undemanding price-to-earnings ratio of just 16. That’s around 30% lower than its long-term historical average of 24 and firmly behind the wider industry average of 20. So, could this actually be a terrific buying opportunity despite the risk?
At its core, Diageo remains a highly profitable enterprise with a vast portfolio of powerful brands benefitting from ongoing premiumisation and innovation. Despite the recent challenges, those competitive advantages remain firmly in place.
With a reset in leadership, the business appears to be at a crossroads. If the new management is successful in delivering sharper execution and financial discipline, then even if growth remains elusive, the impact could be offset by superior profitability.
Obviously, there are no guarantees here. But with the stock trading at such a cheap valuation, betting on a new, leaner, brand-focused, strategic playbook could turn Diageo into another phenomenal FTSE 100 recovery story. That’s why, despite the risks, it’s a business that’s still worth considering today.
