Dissecting the market to see what’s moving up and down
Thirty out of the 38 sectors in the FTSE 350 have fallen in value since the start of 2018. The market as a whole, as defined by the FTSE All-Share, is down by 8.5%. The FTSE 100 index has fared even worse, down 9% year-to-date.
Five of the FTSE 350 sectors in positive territory have mustered up gains of less than 2%. The other three sectors have been driven by individual stocks having a dominant influence due to large market cap weighting.
Industrial Transportation’s 3.7% rise is essentially down to Royal Mail’s (RMG) shares being lifted by a solution on staff and pension issues. Industrial Metals’ 17.7% rise is attributed to a handful of stocks enjoying higher commodity prices; and Automobiles & Parts’ 34% gain is purely the movement of GKN (GKN) amid a takeover battle.
STOCK PICKING SKILLS
While the overall trend makes for depressing reading, there are plenty of examples of stocks and investment trusts where investors would have still made money since the start of January. It shows how good stock picking skills can help you thrive even in the gloomiest of markets, or at least help cushion blows elsewhere in your portfolio.
Seventy seven stocks in the FTSE 350 are in positive territory year-to-date and 273 have fallen. Seven of the positive territory stocks have been lifted by takeover approaches, the rest in general have risen on the back of good results and favourable actions taken by management to improve the business.
We’re pleased to say that a large proportion of the 77 stocks in positive territory have featured in Shares over the past year with favourable write-ups. These include media group UBM (UBM), hospitals expert NMC Health (NMC) and holidays seller On The Beach (OTB).
Nonetheless, we don’t always get it right and some of the worst performing stocks have also featured favourably in Shares. For example, we’ve long admired Card Factory’s (CARD) business, yet its shares are down 35% this year alone.
You do get winners and losers at the best of times, hence why it is important to always have a diversified portfolio and not be too concentrated in only a handful of holdings.
Further down the market cap spectrum, 59 stocks in the FTSE Small Cap index have delivered a positive return year-to-date versus 227 in negative territory. Some of the best performers (excluding takeover situations) include quantum dots specialist Nanoco (NANO), miner Gem Diamonds (GEMD) and chemicals group Zotefoams (ZTF).
AIM MARKET SUCCESS
The standout market for UK stocks this year is AIM where 362 constituents have delivered a positive share price return since 1 January. That compares with 570 members with a negative share price return.
On that basis, the ratio of AIM risers to losers is 1:1.57. In comparison, the ratio of FTSE 350 risers to losers is a less favourable 1:3.55.
Small cap investing is inherently risky, yet the rewards can be very good when you pick the right stocks.
For example, Akers Biosciences (AKR:AIM) is up by 327% so far in 2018. Financial services group K3 Capital (K3C:AIM) is up by 96.2%; and tech firm AppScatter (APPS:AIM) has seen its share price rise by 71.8% this year. (DC)