It’s been a good year to be an investor in UK equities this year, with the FTSE up 18.69 per cent at time of writing. However, as is custom there has been a huge range of performance within the index – some 173.8 percentage points, our data shows.
Performance of indices in 2013
Source: FE Analytics
Domestic-facing companies have led the charge, while those with international exposure – especially in emerging markets – have struggled. The FTSE 250 and FTSE Small Cap (ex ITs) have outperformed the large index, not least because they feature more domestic names.
Two of the three best performing FTSE stocks of the year are airlines. International Consolidated Airlines Group, which owns British Airways, has posted returns of 117.86 per cent, building on a decent year in 2012. The company has shrugged off problems in its Spanish arm, with analysts crediting the strong performance to a good consolidation strategy.
Among the funds that have profited from holding the company include JOHCM UK Growth and Fidelity Moneybuilder Growth, which both hold IAG in their top-10. Altogether, 18 funds in the IMA universe have a top-10 holding in the stock.
One of the biggest headwinds facing IAG is competition from low-cost airlines, which brings us on nicely to the third best performing FTSE stock of 2013 – Easyjet. Chief executive Carolyn McCall’s firm has enjoyed healthy earnings growth this year, culminating in a special dividend in November. This has helped the firm return 105.07 per cent.
Performance of stocks in 2013
Source: FE Analytics
In total, nine funds hold Easyjet in their top-10, including Tom Dobell’s M&G Recovery portfolio.
Easyjet’s strong growth in recent years saw the budget airline get promoted to the FTSE 100 in the spring, as was the case with retailer Sports Direct, owned by Newcastle United FC chairman Mike Ashley. The stock has returned 87.3 per cent this year, putting it in fifth place. Among the biggest admirers of Sports Direct are FE Alpha Managers Andy Brough and Giles Hargreave, who head up Schroder UK Mid 250 and Marlborough Special Situations, respectively. These are among the seven funds that hold the stock in their top 10.
In second place is financial services company Hargreaves Lansdown, which has returned 104.4 per cent year-to-date. Some commentators argued that the firm’s pricing structure would be a major headwind this year, as a result of the retail distribution review (RDR).
However, as FE Alpha Manager Harry Nimmo (pictured) correctly predicted, the company has gone from strength to strength in 2013. Nimmo’s Standard Life UK Smaller Companies portfolio is one of 10 IMA funds that hold Hargreaves in its top 10.
ITV has also had a stellar year, posting gains of 87.6 per cent, putting it in fourth. A rise in profits, particularly from advertising revenues, has seen the company recover strongly from a weak period between 2006 and 2012.
Performance of stock over 10yrs
Source: FE Analytics
The firm’s improving numbers and decent dividend yield of 1.67 per cent has made it increasingly popular with fund managers of late. FE data shows that 37 funds hold ITV in their top-10, including star manager Nigel Thomas’ AXA Framlington UK Select Opportunities fund.
Other notable performers this year include BT, Lloyds Banking Group and Vodafone, which have all delivered more than 50 per cent over the last 12 months or so. Fund manager favourites such as GlaxoSmithKline and AstraZeneca – both healthcare companies – have also had strong years, with returns of 26.1 and 31.9 per cent, respectively.
It has been a less inspiring year for the likes of Unilever and Diageo however, which had been the darlings of the index in previous years. Worries over valuations and a high exposure to emerging markets have seen them both underperform in the second half of this year.
Performance of stocks in 2013
Source: FE Analytics
Popular companies such as Shell, HSBC, Imperial Tobacco and British American Tobacco have also lagged, each managing single digit returns this year.
At the very bottom of the tables, companies that focus on commodities dominate. The worst two performers overall have been precious metal miners Fresnillo and Randgold Resources, which have lost 58.54 and 35.46 per cent, respectively.
Performance of stocks and index in 2013
Source: FE Analytics
A plummeting gold price has been a major headwind for these companies, but question marks over the quality of management have also hit them hard. BlackRock Gold & General is one of only two funds that hold Fresnillo in its top-10. Randgold is more popular, appearing in the top 10 of 12 IMA funds overall, including Smith & Williamson Global Gold & Resources.
Commodities-focused companies Tullow Oil, Anglo American and Petrofac have also endured difficult years, all losing more than 20 per cent.
Rio Tinto [0.3 per cent] and BHP Billiton [-9.5 per cent] have protected more effectively against the downside, however. Both have recently become popular with UK Equity Income managers attracted by their decent yields. Aviva Inv UK Equity Income, Royal Bank of Scotland UK Equity Income and Lazard UK Income hold both FTSE 100 companies in their top-10.
FE Trustnet will ask fund managers to provide their outlook for different FTSE sectors and companies in an upcoming article later on this week.