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FTSE 350 winners and losers 2019

We take a look at the FTSE 350 companies that have really stood out this year, and those that have struggled.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

We’ve pulled together a list of the best, and worst, performing stocks in the FTSE 350 this year. It looks at total return, so the results assume that dividends have been reinvested, without fees. That means individual investors won’t have seen quite the same results.

It’s worth remembering that a year is a short time when it comes to investments, and it’s not uncommon for stocks that perform well in one year to struggle going forwards, past performance is not a guide to the future. For that reason investors should steer clear of using this as a source of investment ideas without doing significant further research. Nonetheless it’s interesting to have a look at what’s been driving returns this year – both positive and negative.

The best performers include both out-and-out growth stocks and turnarounds that saw the market reward strong operational performances with higher valuations. The losers tended to have specific problems that led to collapses in profitability.

All investments and income can fall as well as rise in value so you could get back less than you invest. Investing directly in individual companies isn’t for everyone. It is higher risk as your investment depends on the fate of one company. If it fails you risk losing your whole investment.

Winners

Stock Return including dividends
Future 185%
Pets At Home Group 151%
Dunelm Group 126%
JD Sports Fashion 125%
Rank Group 105%
IWG 100%
Softcat 95%
Games Workshop 94%
Spirent Communications 93%
Aveva Group 90%

Source: Refinitiv Datastream, 1/1/19 - 15/12/19

Past performance is not a guide to future returns.

Future – Total Return: 185%

Future has had a great year by any standard.

The diversified print and online media group has assembled a portfolio of fairly niche brands like PC Gamer, FourFourTwo and MusicRadar. The idea is that, while there’s a lot of free stuff available online, enthusiasts will seek out premium, curated content. Future makes its money by leveraging these brands in every way it can, including subscriptions, ecommerce, advertising and events.

Earnings have almost doubled and the group’s PE (price to earnings) ratio has expanded from 17.1 to a more heady 24.9. This year saw magazine revenue decline organically while the media business grew. However, acquisitions have boosted both, leading to 70% overall revenue growth.

We like what Future’s doing, but there’s a danger expert curation could be superseded by AI recommendations in the future. Still, you can’t help but applaud Future’s success this year.

See the latest Future Share price, charts and how to trade

Pets at Home – Total Return: 151%

Pets’ PE ratio more than doubled to 19.1 from just 8.7, while underlying profit before tax was up 18.9% in the first half.

While the retail sector is having a tough time, Pets has been transforming its physical locations from shops to total pet care destinations with veterinary clinics and grooming salons. Margins have suffered a bit as Pets has cut prices, and sales have been weighted towards lower margin food instead of accessories. However, cost savings have meant this isn’t a big problem at the moment and lower prices have kept customers coming through the doors.

The big work (and costs) involved in restructuring the veterinary clinics seem to be behind us, and the next step will be building on the digital offering. However, with the shares already among the highest rated (based on PE ratio) in the retail sector, further share price performance will likely depend on the hard grind of profit growth rather than the quick win of improving market sentiment.

See the latest Pets at home Share price, charts and how to trade

Dunelm Group – Total Return: 126%

The UK’s market leader in homeware saw like-for-like sales growth and margin expansion as the group drove efficiencies from the recent Worldstores and Kiddicare acquisitions. Dunelm has moved all of its customers onto a new digital platform and now has just one website and one supply chain, which helps keep costs down.

On the back of this performance, full year profit before tax rose 23%, and a last minute trading update raised profit guidance for next year. The market has duly rewarded Dunelm, which has seen its PE expand from 11.8 to 19.8. Like Pets that puts it in the upper part of the retail sector. Investors will want to see this momentum continued, and with a fragmented market there could be more room for growth ahead – but low hanging improvements from re-rating will be harder to come by.

See the latest Dunelm Share price, charts and how to trade

Losers

Stock Return including dividends
Riverstone Energy -62%
Tullow Oil -61%
Aston Martin Lagonda -54%
IP Group -38%
Plus500 -33%
Fresnillo -32%
Pearson -28%
Centrica -28%
A.G Barr -25%
John Wood Group -22%

Source: Refinitiv Datastream, 1/1/19 - 15/12/19

Past performance is not a guide to future returns.

Tullow Oil – Total Return: -61%

Everything was going rather well at Tullow, but in November the shares took a turn. The group was running into problems at the Ghanaian TEN oil field, and output was set to come in below previous guidance. Worse still, recent discoveries in Guyana were found to contain low quality oil, which is considerably less valuable than was hoped.

Investors had hoped this would be the worst of it, but in an unscheduled update on 9 December Tullow cut guidance again, suspended the dividend, and announced the resignations of its CEO and Exploration Director. This was more than the market could take, and the share price fell, although they’ve since recovered a bit. Part of the problem is that the group is at risk of losing credibility with the market, and whoever comes in to turn things around will have their work cut out.

See the latest Tullow Oil Share price, charts and how to trade

Aston Martin Lagonda – Total Return: -54%

Aston Martin has been a tale of woe since its IPO in October 2018. Successive pieces of bad news knocked the share price from over £18.00 at launch to just £6.30 at the time of writing. The most significant damage was done by a trading statement on 24 July this year, when the group announced that wholesale volumes would be significantly below expectations. As a result, margin expectations and profitability were revised down. Net debt is currently 5.5 times cash profits, which is significant for a loss making car manufacturer.

Aston Martin has attributed the problems to a challenging external environment, and will be hoping that the new DBX can help turn things around. While we’re not sure the world was calling out for an Aston Martin SUV, the company has been talking up the launch. Next year’s Bond film will feature four of the group’s cars, and that may be the best advertising investors can hope for.

See the latest Aston Martin Share price, charts and how to trade

Centrica – Total Return: -28%

It’s hard to have a good year with a dividend cut, and although the market knew it was coming, the scale of the cut still caught investors off guard. The group blamed the UK energy price cap, warmer weather, and additional pension contributions for draining its cash. Management is doing its best to right the ship by focussing on the group’s core competencies. Centrica is exiting its nuclear business and its volatile oil & gas production operations to focus on helping its customers transition to a lower carbon future.

The second half of the year has seen results stabilise, and the group has stuck to its mid-year guidance. The share price actually recovered a little, helped by a bounce after the election as the threat of a below market nationalisation was taken off the table.

See the latest Centrica share price, charts and how to trade

Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Past performance is not a guide to the future. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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