UK investors will be well aware of the lopsided performance of the US stock market in recent months, with a handful of stocks accounting for almost the entire index gains so far this year.

However, a similar phenomenon is occurring right under our noses with most of the gains in the FTSE 100 and FTSE 250 down to the outperformance of some of their larger stocks.

This concentration on a select few tends to obscure what is going on further down the indices, and it was with some surprise that we recently counted 90 stocks trading at or within 3% of their 12-month lows.

Just over half of the stocks in the FTSE 100 are up this year, with gains being led by those with market caps over £10 billion like Associated British Foods (ABF) up 24%, Flutter (FLTR) up 36%, HSBC (HSBA) up 22%, Rolls-Royce (RR.) up 67% and 3i (III) up 41%.

In the FTSE 250, less than 100 stocks or a third of the index are in the black with gains most notable in Aston Martin Lagonda (AML) up 135%, Carnival (CCL) up 75%, Marks & Spencer (MKS) up 52%, EasyJet (EZJ) up 47% and Mitchells & Butler (MAB), also up 47%.

In the middle of a cost-of-living crisis, the outperformance of a group of stocks which depend on consumer spending seems counter-intuitive if not downright bizarre. At the same time, the market’s dislike of other sectors seems to be just as extreme.

Take real estate investment trusts and infrastructure trusts, which are being put through the wringer as UK base rates rise, which has
the mechanical effect of lowering the value of their assets even though most are reporting rising earnings.

Out of 90 stocks trading at or near their year-lows there are 20 REITs and a dozen infrastructure trusts, including 3i Infrastructure (3IN) which is a holding for big brother 3i, one of the FTSE’s best performers.

Renewable energy infrastructure is particularly out of favour, yet so are half a dozen smaller oil and gas producers, but the list isn’t restricted to the bottom end of the market.

Large-cap stocks such as Anglo American (AAL), Diageo (DGE), Mondi (MNDI) and Vodafone (VOD) are all trading at or close to 12-month lows, with Anglo American and Mondi offering mid-single-digit yields and Vodafone approaching a 10% yield.

As Ben Graham put it, Mr Market will happily quote prices all day long without making any sense half of the time so it’s up to investors to work out the real value of these companies.

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