The FTSE 100 index is down almost 3% from where it was one month ago. By contrast, a number of its constituents continue to recover strongly. Some shares are even hitting all-time highs!
Let’s take a closer look at three examples of stocks that investors can’t seem to get enough of.
Fewer claims, higher profits
Shares in insurer Admiral (LSE: ADM) are up 14% in the last month alone. If you’d bought back in the middle of a miserable March, you’d now be sitting on an even bigger gain of around 43%.
This popularity isn’t a complete surprise. Last week’s interim results revealed a 31% rise in statutory pre-tax profit to £286.1m. At least some of this is due to the company receiving fewer motor claims in March and April as the UK was forced into lockdown.
Another attraction has been the company’s decision to reinstate its special dividend. The 20.7p per share payout will now be distributed in addition to a half-year dividend of 70.5p.
Despite its high margins and income credentials, Admiral now trades on a forecast price-to-earnings (P/E) ratio of 20. This makes it significantly more expensive than top-tier peer Direct Line Insurance (13 times earnings).
After such a strong performance, I think the share price might soon pause for breath.
Lockdown beneficiary
A second stock from the FTSE 100 that’s been doing very well is B&Q and Screwfix owner Kingfisher (LSE: KGF).
A beneficiary of people having (a lot) more time on their hands lately, Kingfisher recently reported a 21.6% jump in like-for-like sales in the second quarter of its financial year (to 18 July).
As a result of this and cost-cutting measures, the company now believes that half-year adjusted pre-tax profit will come in ahead of that achieved last year.
Unsurprisingly, investors have reacted positively. Over the last month alone, Kingfisher’s stock has climbed 19% in value. If you’d bought when the world was going to hell in a handcart back in March, you would have doubled your money by now. That’s a much better return than the 22% achieved by the index.
Whether this momentum can last, however, is debatable. With restrictions lifted and people slowly returning to work, the shares may begin to lose steam.
A forecast price-to-earnings ratio of 14 is far from excessive, but with a lot of debt still on the balance sheet, I wouldn’t go chasing the stock from here.
Pride before the fall?
A third FTSE 100 company that’s been doing very well is Ocado (LSE: OCDO). Up 10% in the last month and well over 100% since early March, the online grocery retailer continues to attract momentum-chasing investors.
Since betting with the trend can often prove a winning strategy, I don’t doubt there’s a chance to still make money with Ocado. Once again, however, I would caution that this company is far from a risk-free bet.
Lockdown helped retail revenue soar by 27% year-on-year in the six months to the end of May but the company is still making a loss. That’s concerning when, at nearly £18bn, Ocado’s valuation is approaching that of FTSE 100 peer Tesco. After all, the latter boasts a near-27% share of the grocery market. There’s also Amazon to worry about.
The Hatfield-based business will surely benefit from the shift to online grocery shopping. At this price, however, it simply must deliver.
