The best performing stocks of 2020
After an extraordinary year we look back at some of the top performers in different size categories from the heavyweights all the way down to sub £100 million market cap stocks at the bottom of the market and examine what has driven them higher in 2020. We have excluded investment trusts.
£4 billion + market cap
Share price movements in mining companies can be about exposure to the commodities they produce rather than the business itself, which has arguably been the case with Fresnillo (FRES).
The gold and silver miner underperformed operationally in 2020 with gold production down 13.7% in the first nine months of 2020 and silver production down 1.8%, but its shares almost doubled in that timeframe.
This partly reflects the 25% rise in the gold price this year and almost 50% rise in the silver price. But it also reflects Fresnillo’s ability to capture some of the upside in rising prices as it reported in July a 52% hike in adjusted first-half profit.
As the leading general equipment rental firm in the US, Canada and the UK, Ashtead (AHT) was designated as an ‘essential service provider’ and was therefore spared the worst effects of the pandemic even as work in many of its markets stopped.
In fact, the firm saw an increase in demand for its specialty equipment used in emergency response work, which has continued through the end of the year meaning earnings are expected to beat earlier forecasts.
With more normal demand and cash flow generation next year, we expect the firm to resume its acquisition and dividend strategy.
Online fast fashion retailer ASOS’ (ASC:AIM) shares rallied strongly off the market bottom after a £239.4 million capital raise at the height of the crisis in April calmed investor nerves.
ASOS then profited handsomely as the pandemic accelerated the shift towards online shopping and changing consumer habits also led to lower product returns, with positive momentum and forecast upgrades powering the shares higher.
ASOS was able to capitalise on the shift from occasion wear into more casual, lockdown-relevant products. In 2021, ASOS hopes that effective vaccines will help lift the economic hardships heaped upon its 20-something customer base by the virus.
Investor’s flight to quality through most of 2020 is perfectly illustrated by engineering business Spirax-Sarco (SPX). The thermal energy management and niche pumping specialist had struck an increasingly cautious tone as the year wore on yet investors latched on to the company’s excellent record of cash generation and bulletproof balance sheet during this most testing of years.
This optimism has paid off, with trading declines less fierce than previously anticipated and the stock making gains since March, hitting an all-time high of £119.15 in mid-November.
Outside of the top 10 performers, despite aviation being one of the hardest hit industries thanks to the coronavirus pandemic, budget airlines Ryanair (RYA) and Wizz Air (WIZZ) have still managed to achieve a positive share price performance year-to-date (7.5% and 16.4% respectively).
This reflects their resilient nature in terms of operational performance and financial strength.
Their load factors – how full the planes are – have remained at 60% to 75% for the flights they have operated, compared to under 50% at British Airways owner International Consolidated Airlines (IAG), for example.
Both have also been able to push costs lower compared to their rivals and drive ancillary revenues (luggage fees, etc) higher. Ancillary revenues are prized by airlines for their stable nature compared to fluctuating ticket prices.
Part of Wizz Air’s strong performance has also been down to its exposure to the higher growth central and eastern European market, as well as its lack of debt compared to its peers.
£1 billion to £4 billion market cap
AIM-quoted gold explorer Greatland Gold (GGP:AIM) has had a phenomenal 2020 and this in part has reflected the rising gold price, but has also been down to the exciting discoveries it has made.
The company owns the Havieron deposit in Western Australia, which contains an estimated 3.4 million ounces of gold. Over the year Greatland Gold has reported several drilling results showing the project’s high potential, something which has helped its share price rise.
Look out for news next year about other projects being explored. The company recently appointed a new CEO as it seeks to unlock further shareholder value in 2021 and beyond.
Online electrical retailer AO World (AO) thrived during the pandemic as lockdowns shifted buying habits online and drove buoyant sales of laptops, fridge-freezers, washing machines and other electrical appliances.
In 2021, investors will be hoping that the customers and market share secured during this purple patch stick as the world reopens and that AO can at last make some real money, having delivered a modest profit breakthrough in the year to March 2020. The market will also be keeping tabs on AO’s rapidly-growing German business, which is forecast to turn a profit in full year 2022.
The stellar performance of S4 Capital (SFOR) in 2020 suggests the ambition of founder and executive chairman Martin Sorrell in emulating the acquisition-led growth path he achieved at WPP (WPP) may not have been overblown.
The company has benefited from its focused strategy as, like in many industries, the pandemic has accelerated the digital transition. The company’s three-year plan is to double sales and profit from 2021 to 2023. As Numis analyst Steve Liechti observes: ‘We see a nice play on digital/data led growth in marketing given its blank sheet focus and experienced management.’
The pandemic accelerated the growth in gaming with a huge influx of new gamers during lockdowns and many more hours of time spent online.
This was reflected in all the quoted gaming stocks which upgraded their earnings expectations throughout the year, boosting share prices.
The best performing stock among them was racing games specialist Codemasters (CDM:AIM) whose shares gained 134% after receiving two takeover bids, the latest from the FIFA football series giant Electronic Arts.
£200 million to £1 billion market cap
Diagnostics firm Novacyt (NCYT:AIM) achieved a staggering gain of 6,220%, turning a hypothetical £1,000 investment into £63,200 (not including any charges).
Novacyt was faster than any other UK company to respond to Covid-19 and made the strategic decision to develop a test in early January.
Later the same month its test received clinical use approval from several leading global regulatory authorities.
While a lot of small caps promise growth and disappoint, Novacyt has successfully monetised its early move advantage with first-half revenues growing 10-fold and gross profits 13-fold.
Trinidad oil and gas play Touchstone Exploration (TXP:AIM) is an outlier in a sector which has been ravaged by oil price volatility as Covid-19 decimated demand.
The reason for its stellar run is a string of positive updates on Ortoire block located onshore on the Caribbean island. The company has discovered large quantities of natural gas with a willing buyer for this resource in the form of the National Gas Company of Trinidad and Tobago.
The company has identified 21 additional drilling prospects to go after on Ortoire and should bring some of the discovered gas on stream in 2021 having secured a sales agreement with the state operator.
Covid created perfect conditions for online wine retailer Naked Wines (WINE:AIM) to thrive and the shares fizzed 173% higher as it capitalised on elevated demand from thirsty-yet-housebound customers, new and repeat alike.
Connecting wine drinkers with world class winemakers from around the globe, investors will be looking to see if growth slows once restrictions on social life are lifted and bars and restaurants (hopefully) reopen fully in 2021. Entering the New Year, there is excitement surrounding the huge growth prize in the US, where wine enthusiasts have become increasingly content to shop online.
A notable feature of the market’s performance this year is the number of smaller-to-medium-sized firms which have soared in value. Of UK stocks in the £200 million to £1 billion bracket, 19 achieved gains in 2020 of more than 100% and 36 stocks have put up advances in excess of 50%.
These sorts of moves are more closely associated with micro-cap stocks, which are often equally capable of dramatic moves in a less positive direction, but it seems more mature businesses can soar too.
£50 million to £200 million market cap
Shares in respiratory drug discovery company Synairgen (SNG:AIM) surged 1,500% in 2020 after a string of positive trial results for its Covid-19 inhaled drug SNG001.
Patients receiving the drug had greater odds of improvement and recovered more rapidly than those patients receiving the placebo.
The treatment is an important therapeutic option alongside vaccines not just for Covid-19 but other seasonal threats and pandemics.
If the positive results are repeated in the last stage trial currently being conducted the drug will prove superior to US firm Gilead’s Remdesivir in the opinion of analysts at Numis.
Hemp grower and CBD oils supplier Zoetic (ZOE) enjoyed a strong 2020 thanks to a new distribution agreement in the key US market combined with surge in demand for its ‘Chill’ brand of tobacco alternative during the pandemic.
In November 2020 the firm announced another ‘game-changing’ deal which will see its products sold in close to 90,000 corner shops, convenience stores and petrol stations across the US.
Next year should also see the firm submit a validated novel food application to the UK Food Standards Agency prior to the launch of its Chill ‘gummies’.
The story at waste-to-energy play EQTEC (EQT:AIM) has really gained traction in 2020. The company has developed the EQTEC Gasifier Technology which converts household rubbish into electrical and thermal energy and it is busily selling to developers in the space.
Results for the six months to 30 June revealed growth in its pipeline to €341 million although the business remains loss-making for now. The company is also advancing projects itself, recently taking full ownership of the Deeside Refuse Derived Fuel development in North Wales.
Outside of the top 10 best performing stocks in the £50 million to £200 million market cap category, the improving prospects of companies with chequered pasts powered strong share price gains. These included a 90.3% advance from Accrol (ACRL:AIM), the private label loo rolls-to-facial tissues maker which has completed an impressive turnaround and established a platform for growth with a whole host of retailers.
Inkjet printing tech company Xaar (XAR) advanced 173% as its new strategy began to pay off, while logistics and parcel delivery play DX (DX.AIM) rallied 89.6% as its financial revival resulted in some big analyst upgrades.