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UK stock market – FTSE 100’s winners and losers in 2020

Equity Analyst Sophie Lund-Yates looks at the best and worst performing UK shares in 2020 so far, and shares our outlook for 2021.

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.

2020’s been a chaotic year for everyone, and the UK stock market has been particularly volatile. The overall market is down on the year, but has made up lots of ground since the pandemic-induced crash in March.

FTSE 100 including dividends

Past performance isn’t a guide to future returns. Source: Refinitiv Datastream, 01/01/2020 to 14/12/20

However, the FTSE 100 index is just the weighted average performance of all 100 of the UK’s largest companies. While some stocks have done very well, others are down considerably. In this article we look at 2020’s best and worst performing stocks in the FTSE 100 so far. It’s worth remembering that a year is a very short time period though and past performance is not a guide to the future.

All investments and any income they produce can fall as well as rise in value so investors could get back less than they invest.

As you’ll see, there are some patterns – certain industries have had a terrible time, while others have actually benefited from the disruption.

Biggest fallers

Name Return
INTERNATIONAL CONSOLIDATED AIRLINES GROUP -62%
ROLLS-ROYCE HOLDINGS -49%
LLOYDS BANKING GROUP -43%
ROYAL DUTCH SHELL B -38%
BP -38%
ROYAL DUTCH SHELL A(LON) -36%
INFORMA -35%
NATWEST GROUP -34%
STANDARD CHARTERED -33%
MELROSE INDUSTRIES -32%

Past performance isn’t a guide to future returns. Source: Refinitiv Datastream, 01/01/2020 to 14/12/20

Airlines

Unsurprisingly, pandemic-induced travel bans aren’t good for airlines.

Airlines faced two big problems this year. Firstly, fuel is a large part of total airline costs, and because fuel prices vary along with oil prices, carriers tend to hedge these risks.

To hedge the oil price, airlines pay in advance for contracts that guarantee a certain price. Unfortunately, when fleets are grounded those contracts become useless as airlines need less fuel. It’s meant lots of airlines didn’t take up those contracts, leading to big hedging charges earlier in the year.

The next problem is fixed costs (things like hangar rentals). Airlines were able to flex some costs, like staff, and renegotiate others. But that still left lots of money flowing out the door each week.

Altogether airlines suffered massive losses. In lots of cases they had to turn to investors for fresh capital.

If air travel recovers next year, some of the weaker players might have folded. Less competition to fill seats could make room for price increases. However, airline investments are very risky at the moment. They should only be considered by investors with a higher appetite for risk, and as a small part of a balanced portfolio.

Further downstream, the hit to air travel has also hurt those in the business of making and servicing plane engines. When planes aren’t flying, few order new jet engines, and existing ones need servicing less often.

Oil

When the pandemic hit, oil prices collapsed as global shipping, air travel and other transport slowed to a crawl. This put pressure on the UK’s big oil producers because the cost of running each well is largely fixed. If the oil price is higher than the well’s running costs it’s profitable, and if not, well… it’s not.

The oil giants were able to take some steps to control costs, but it still hurt. The oil price has since recovered lots of ground, and in some cases profits have started to gain a bit.

As long as the oil price stays high, oil companies should be able to turn things around. However, the oil price is notoriously difficult to predict.

Banks

When economies are doing well, banks tend to do well too. People can pay back their debts, and they generally want to borrow more to start businesses and buy things.

However, when conditions sour people can struggle to pay back those loans.

Recessions usually lead to central banks cutting interest rates to increase economic activity. This squeezes banks’ net interest margins, which is the difference between what they charge on loans and pay on deposits.

With the economic shocks we’ve seen, bank stocks haven’t done well this year. However, while traditional banking has struggled, other trading divisions have profited from a spike in trading volumes as investors reacted to volatile stock markets. Wealth management has also done well.

Biggest risers

Name Return
SCOTTISH MORTGAGE 102%
OCADO GROUP 78%
FRESNILLO 77%
FLUTTER ENTERTAINMENT 68%
ANTOFAGASTA 56%
POLYMETAL INTERNATIONAL 42%
B&M EUROPEAN VAL.RET. 41%
ASHTEAD GROUP 41%
RIO TINTO 32%
ADMIRAL GROUP 31%

Past performance isn’t a guide to future returns. Source : Refinitiv Datastream, 01/01/2020 to 14/12/20

Miners

The ten best performing stocks in the FTSE 100 this year include four mining companies.

Strong performance is mainly thanks to a dramatic increase in the price of precious metals, which investors have tended to see as a safe haven in times of crisis.

The gold price hit a record high earlier this year. And while it’s fallen a little since then as more positive news about a successful vaccine has given investors confidence, the price is still high.

Precious metals can sometimes seem like an enigma. They don’t make any money for investors in their own right, and add little value apart from some industrial use.

However, humans have valued gold for decades and we doubt that’s going to change any time soon. The difficulty is knowing the right price to pay. Is gold overvalued or undervalued at the moment? Nobody really knows.

Online Delivery

It’s not surprising that online shopping has benefitted at the expense of the high street this year.

Shops have had to shut their doors for large chunks of the year. And even when open, lots of people have cut down on visiting stores because of social distancing measures.

The shift to online has opened the door for online retail to accelerate its growth. We think this trend will probably continue, and online sales for lots of retailers are growing exceptionally quickly. In our view, a return to normality is only likely to slow the trend, not reverse it.

We don’t think the high street is dead though, and there could be some attractive names among those left standing when this is all over.

High street collapses – is less competition automatically good news?

What’s to come in 2021?

We certainly hope next year isn’t as unpredictable as this one. A lot rests on the strength of any potential economic recovery.

It’s important to remember lots of companies listed on the UK stock market are global businesses, so it’s not just the domestic economy that matters.

The important thing is to make sure your portfolio is diversified and your investments continue to meet your needs and attitude to risk. That way, all your eggs won’t be in one basket and if a particular company or industry does poorly in theory you will be less affected.

Being well diversified also means you’ll be able to take part in a potential recovery, whatever sectors ends up doing well.

Find out more about diversification

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.



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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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