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Winners and losers so far in 2019

We take a look at the biggest movers and shakers so far this year.

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.

There’s been plenty of ups and downs in 2019, both in the stock market and in politics.

There are winners and losers in both the FTSE 100 and 250. Six months in to the year we review some of the stories behind the headlines for some of the more familiar names.

Investments can fall as well as rise in value and you may not get back what you have invested. Yields figures given below are variable and are not a reliable indicator of future income. Past performance is not a guide to the future.

Performance calculated on a total return basis, and taken from Thomson Reuters Eikon on 17 June 2019.

Winners

FTSE 100

Name Change (02/01/19 to 16/06/19)
Evraz 52.5%
Micro Focus 47.0%
Ocado 46.8%
Halma 45.9%
Spirax-Sarco 40.6%

Ocado was one of 2018’s strongest performing shares, and it’s run has continued so far in 2019 but of course there are no guarantees this will keep going. Impressive stuff when you consider that the shares suffered a significant jolt on the back of a fire at one of its key distributions sites in February.

Trading has been strong, but the big story is the deal to sell 50% of the UK retail business to Marks & Spencer. M&S will get exposure to a fast growing online segment, and a platform to up the ante as it tries to break past the image of its popular food being just ‘something for tonight or tomorrow’.

The deal saw M&S write a cheque for £562.5m, and the price rose to £750m over time. That cash inflow is clearly good news for Ocado. It’ll cover the development of all the customer fulfilment centres the group is currently contracted to build, including as many as 20 in the US in partnership with Kroger.

For the long-term investment case, much depends on the smooth roll-out of these new distribution centres, and in all likelihood the signing of more deals in the next few years.

Find out more about Ocado

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FTSE 250

Name Change (02/01/19 to 16/06/19)
Greggs 79.8%
JD Sports 69.6%
Games Workshop 68.8%
Dunelm 68.5%
IWG 63.5%

Greggs is top of the tree in the mid cap index.

There’s good reason for that. A trading update in May showing sales rose 15.2% in the first 19 weeks of the year, against just 4.7% in the prior year. And courtesy of the success of the vegan sausage roll that momentum looks in our view set to continue though of course there are no guarantees.

Potential investors should bear in mind that while revenue growth is helping profits rise, the share price has risen even faster. That means the price to earnings ratio has risen from 18 at the start of the year to an all-time high of a shade over 25.

It’s a similar story on the dividend. While analysts have upgraded forecasts for this year’s dividend from 35.7p to 48.9p per share, the increased share price means the prospective yield for those considering investing now is still a lowly 2.2% next year.

Still, Greggs’ payout is comfortably covered by free cash flow and earnings. And with analysts forecasting further sales increases and some margin improvements on the back of continued investments in the supply chain, there’s room for further dividend increases. As ever though, remember there are no guarantees.

Find out more about Greggs

Losers

FTSE 100

Name Change (02/01/19 to 16/06/19)
TUI -28.3%
Centrica -26.1%
IAG -25.5%
Sainsbury -23.9%
NMC Health -15.3%

The wind went out of Sainsbury’s sails when the merger with Asda was abandoned on competition grounds in April.

Hopes were high that the deal, which would have ensured the enlarged group leapfrogged Tesco in the market share league table, could have generated cash savings of £500m, even after reducing prices on many everyday items.

With that deal dead in the water, Sainsbury is left in a rather sticky situation. The market remains intensely competitive, and others are getting stronger. Tesco has successfully rebuilt margins, while online players like Ocado and Amazon continue to grow.

There’s also the fact the ‘for sale’ sign above Asda’s door will likely attract other buyers. The potential tailwind of a successful merger could turn into a headwind if Asda finds a buyer that’s willing to invest.

Weakness in the shares price has pushed the prospective yield up to an attractive 5.6%.

But with Sainsbury’s management closely tying the dividend to profits, the group will need to reverse a trend that’s seen profits fall from £879m in 2014 to £723m last year if the payout is to grow. CEO Mike Coupe’s aiming to get things moving again by stepping up the focus on digitalisation and continuing to invest in store improvements.

Find out more about Sainsbury

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FTSE 250

Name Change (02/01/19 to 16/06/19)
Kier -67.5%
Metro Bank -65.5%
Saga -64.8%
Indivior -60.0%
Plus500 -53.7%

It’s been a miserable six months for Kier.

In December close to two in three investors turned their noses up at a rights issue aimed at raising new cash for the stricken Crossrail and HS2 contractor.

While the group still received the full £264m as brokers underwrote the deal and ended up on the hook for the remaining shares, investors’ scepticism proved a sign of things to come.

The shares drifted down over the first half of the year, then was jolted in June by a profit warning and rumours of asset sales. That ensured the group slipped into the bottom five FTSE 250 performers and looks set for demotion at the next reshuffle.

The warning confirmed revenues would be weaker than expected, so underlying operating profits would be £25m lower than previously forecast. Add an extra £15m in restructuring costs and the group expects, despite the rights issue, to report a net debt position again at the full year stage.

So looking ahead, there’s plenty to concern investors. We can expect a strategic review before full year results in September, and disposals are certainly possible. The group is reportedly considering selling the housebuilding division, which had generated £25.9m of operating profit last year.

That will relieve pressure on the group’s balance sheet, but it would cut off one of the highest margin parts of the business. And with operating margins expected to be under 3% this year, losing the division would be a major blow.

Find out more about Kier

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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