Our portfolio of picks for 2024 is off to a solid start in what proved an uneven first quarter for the stock market as a whole.
Our return of 9% is comfortably ahead of our FTSE All-Share benchmark at 3.9%. It’s a tale of feast and famine, however, with half of our selections achieving double-digit gains while 40% are in the red.
THE BIG WINNERS
At the end of 2023, shares in biotech specialist Puretech Health (PRTC) received a significant boost after it announced Karuna Therapeutics, one of its ‘Founded Entities’, was being acquired by Bristol Myers Squibb (BMS:NYSE) for a total equity value of $14 billion.
Puretech operates a unique business model, investing its own capital to develop a pipeline of assets as well as running a ‘Founded Entities’ business for outside investors. It had funneled $18.5 million into the founding and development of Karuna and in total has generated $1.1 billion of cash from that investment. The company announced in March it intended to return $100 million to shareholders through a tender offer.
Also performing strongly is Just Group (JUST), the retirement products and services specialist. The shares hit 12-month highs on the back of a strong set of 2023 results (8 March) with underlying operating profit up 47% to £377 million and confirmation that momentum in the business had continued into 2024.
Shares in energy services outfit Hunting (HTG) have chalked up a decent advance amid rising oil prices. Its 2023 results were in line with expectations, with sales up 28% year-on-year to $929 million and good visibility on forward work thanks to an order book up 19% at $565 million (28 February).
Reflecting on the numbers, Canaccord Genuity analyst Alex Brooks commented: ‘We see these results as an important step in Hunting’s steadily-building record of growth and profitability; as highlighted in the results presentation, there remains extensive scope for further improvement, as well as the potential that a robust balance sheet and profitable underlying business enables.’
STEADY EDDIES
Bowling alley operator Hollywood Bowl (BOWL) has seen its shares maintain their recent momentum as it has progressed the £10 million share buyback programme announced alongside its results for the 12 months to 30 September 2023 (18 December 2023). The company is set to unveil its numbers for the six months to 31 March on 3 June.
We saw data analytics specialist RELX (REL) as a beneficiary of the AI (artificial intelligence) theme and this combined with a robust set of 2023 results – with revenue growth of 8% to £9.2 billion and underlying operating profit growth of 13% to £3 billion – has acted as a catalyst for the stock year-to-date. A £1 billion share buyback announced alongside these results (15 February) hasn’t done any harm either.
Struggling to make progress are medical products company Smith & Nephew (SN.) and discount retail chain B&M European Value Retail (BME).
Despite revealing 5% revenue growth in the ‘golden quarter’ which encompasses the Christmas period, the latter has received short shrift from the market thanks to issues around disruption to Red Sea shipping and the knock-on effect on its supply chain, concerns about the wider retail sector and its market share in food.
However, Liberum analyst Adam Tomlinson sees these concerns as unwarranted and says: ‘New management has brought even greater strategic clarity – focusing on price, product, availability, and store standards. Our pricing survey, store visits and the track record of delivery all give us confidence.’
B&M is set to update on its performance in the 12 months to 30 March on 16 April ahead of announcing the results in full on 5 June.
Some lingering scepticism around the company’s ability to achieve its 20% margin target in 2025 has hit sentiment towards Smith & Nephew with its 2023 results proving solid rather than spectacular. As Berenberg analyst Sam England observes, the company is now approaching a ‘critical phase’ in its turnaround. Investors will be hoping to see signs of further progress when the company updates on first quarter trading (likely at the end of this month).
US SELECTIONS A LETDOWN SO FAR
Despite the UK market lagging many of its global counterparts in 2024, if we just looked at the performance of our UK-listed selections in isolation we are sitting on a 15%-plus gain. The two major laggards are our US tech selections, reflecting the reality that while some stocks in this space have continued to surge others have struggled.
Creative digital software firm Adobe (ABDE:NASDAQ) took a hit in mid-March as it a predicted weaker-than-expected outcome for its second quarter and missed analyst estimates for annualised recurring revenue in its Digital Media division. This tempered some of the recent excitement about the company’s AI-related potential.
Meanwhile the prospect of slowing growth in 2024 has put the skids under database software specialist MongoDB (MDB:NASDAQ).
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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