Just before heading into 2020, we review the equity markets over the past year and see the top risers and fallers of 2019
Looking back at the markets in 2019
- Investors in Luceco have seen +225% return on investment in last 11 months, while Metro Bank sees return on investment fall by 95%
- However, for some unfortunate investors there are a number of companies who have totally disappeared altogether
- For AIM market investors, Petrel Resources and Motif Bio claim top prizes for risers and fallers respectively
2019 started off on the back foot following the selloff at the end of 2018 amid fears of a global economic slowdown and the further dampening effects of the US-China trade war. However, as we progressed through the first quarter, economic data from around the world did not live up to these fears, resulting in a fairly dramatic recovery across developed markets. This was even the case in the UK despite the worries over the first Brexit deadline of the 31st of March.
Since the first quarter though, US and European markets have steamed ahead, leaving behind UK shares, which were stuck in a rut amongst the Brexit shenanigans. On top of this, we’ve had some sectors going through particularly difficult periods. Retailers have felt the strain of less consumer confidence as well as the structural challenges of online competition. Utilities faced regulatory pressures as well as the threat of nationalisation from a hard left Labour government. And bank’s profits were hit by lower interest margins and PPI pay-outs. While other sectors had a mixed year, one of the best performing sectors has been healthcare and pharmaceuticals. Meanwhile, sterling’s weakness was good news for multinationals and a drag on the more UK focused companies.
The last quarter of the year though has seen some political developments that should, in theory, remove the “dither” in parliament and allow businesses and consumers to look forward again. This has led to strong gains across companies and sectors exposed to the UK such as the house builders and UK retailers, while utilities and banks sigh with relief to see the back of Corbyn.
In the New Year, though, we’ll experience what “getting Brexit done” actually means and most professionals in our industry suggest it’s unlikely to be as plain sailing as we have been led to believe.
FTSE All-Share Risers:
The 225% year to date (YTD) return will undoubtedly lift an eyebrow among most investors. Yet this performance figure should be taken into context as the current share price is a long way off since before the massive profit warning in 2018 that came as a result of an incorrect assessment of the value of its stock, the increased costs of commodities and rising value of the Chinese RMB at the time. However, the LED lighting specialist has seen improved trading this year with first half revenues up by 10%.
The publisher has seen a steady rise in revenues in recent years, partly helped by acquisitions but online access and click through advertising on its respective websites shows this is no longer an old economy stock.
Unlike one of its major competitors, JD Sport is showing that you don’t have to ‘pile em high and sell em cheap’. It is reluctant on discounting, keeping margins high while expansion into the US and Asia is proving fruitful.
After a tough 2018, trading this year has been a lot better with rising retail sales supported by the decision to buy out certain joint ventures and a new fee structure in vet care. A vast amount of pet owner’s data is also helping to drive online subscriptions services.
Who needs WeWork when you have the original workspace solutions group doing it the right way, without the hype while also being profitable? We have previously had this on our Buy list and it has continued to go from strength to strength through the structural growth in the market and international expansion.
FTSE All-Share Fallers:
The shares have really been punished for the Management's failure to correctly assess the riskiness of parts of its loans portfolio. Meanwhile the pressures of competition and low interest margins have continued to punish the company. Past corporate governance and a lack of confidence in the business model has seen the shares lose nearly all their value.
The Government’s refusal to help the company out was the nail in the coffin earlier this year and now leaves the necessary funding to develop the mine for production very challenging. This should have just been a punt for most investors, but a large number of retail investors unfortunately fell for the hype and allocated too much.
This is another one of the UK support services and infrastructure groups who became overzealous in trying to win any old contract and later realised they could not deliver these at profits. At least they haven't gone under yet (unlike Carillion) and there is some hope that infrastructure spending pledges in this election campaign can help revive the sector.
The shares halved in August on a weak trading update amid signs of a slowdown in the guarantor lending market and so management reduced its growth outlook. There was also worry over rising bad loan provisions and the shares were not helped by the company's attempt to tighten lending conditions in the face of increased regulatory scrutiny in the subprime lending market.
Falling diamond prices has made for a tough environment for diamond miners and PetraDiamond who has piled up the debt to expand a major mine in South Africa raises concerns that it will find it difficult to refinance debt that is due to mature shortly.
However, these top five fallers don’t represent the worst case scenarios. For some unfortunate investors there are a number of companies who have totally disappeared altogether. This year marks a five year high for the number of UK corporate failures and investors in the following have lost all of their money if they bought at the beginning of the year:
Thomas Cook: Brexit, too much capacity in the industry, not structured for on-line sales and ultimately too much debt.
Mothercare: its problems were specifically in the UK with footfall low amid competition and the decline of retail sector in general.
Debenhams: another retail catastrophe, seemed to prefer administration than fall into the hands of Mike Ashley.
Patisserie Valerie: went into administration at the start of the year following 2018’s accounting scandal/fraud.
AIM All-Share Risers:
Looking outside the main market at the AIM All-Share listings, there have been even bigger movers, with all the top five gainers being in mining, oil or biotech with a discovery or anticipation of positive exploration of R&D projects:
AIM All-Share Fallers:
While on the flip side, investors in the following have lost almost all of their money and holding onto them for a little bit longer could make sure they lose everything:
Cabot Energy: -98%
AIM companies are inherently risky given the type of companies they are – exploration and research driven, meaning there usually is no revenue stream so it is all hit and miss with a single well, dig or successful trial of a drug or treatment.
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