Small Caps Thrashed FTSE Blue Chips Last Year!
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This article was originally written on 9 December 2015
Has the market been kind to your portfolio in 2015?
I have a feeling your answer may differ, depending on whether or not you own a large chunk of commodity and oil shares!
I was browsing through a list of the FTSE 100’s risers and fallers last night, and I was taken aback at just how severely the mega-commodity behemoths had crashed in 2015.
BHP Billiton has tanked by 43%… Rio Tinto has lost 31% of its value… and commodity trading giant Glencore has crashed by 71% in 2015 so far!
That doesn’t make for pleasant reading for anyone who owned these goliaths of the resources market this year — and if you’re among them, I sincerely hope your fortunes improve in 2016.
But as I sat trawling through the numbers, something else dawned on me too…
The FTSE’s Biggest Names in the Red…
It hasn’t been a great year for a number of high profile FTSE 100 giants, even outside of the resources sector — many of them among the most popular shares owned by UK investors.
Emerging market bank Standard Chartered dropped 45%. British Gas owner and utility giant Centrica fell 24%. Supermarkets Tesco and Wm Morrison suffered another year of declines, 14% and 20% respectively.
And of the top 8 performing FTSE 100 shares this year?
I doubt many individual investors would have even heard of most the names — let alone owned them in their portfolios!
The two largest companies in that list were £17bn CRH — which sells cement and rubble — and £7bn Mondi, which makes paper and packaging products.
The FTSE 100 has dropped 5.1% this year, but I’d be willing to bet that most individual investors have found things even more challenging than that figure suggests…
…Considering you’re a lot more likely to own the likes of Tesco and BHP Billiton than obscure packaging and cement companies!
So, it’s been a tough year for the FTSE 100 — and an even tougher year for the investors who own its most popular shares.
But it’s not been all doom and despair for everyone in 2015…
That is, if you know where to look!
You see, while the FTSE 100 has lost 9% this year, the FTSE SmallCap index has actually gained 4.04% in 2015. That’s around a 13% differential in performance… and the critical difference between profit and loss.
Chart from Google Finance — red line is FTSE 100, blue line is FTSE SmallCap Index
The small-cap market is home to all sorts of attractive, niche, fast-growing businesses — the sort that my team and I research and recommend over at our premium advisory service, Motley Fool Hidden Winners.
It’s not just over the past 12 months that small-caps have outperformed, too.
Let’s zoom out and take a look at performance over the last five years…
Chart from Google Finance — red line is FTSE 100, blue line is FTSE SmallCap Index
Astonishing, right?!
The FTSE SmallCap index has utterly thrashed the FTSE 100 blue chip index in the last five years — thanks to performances from companies that most investors have probably never even heard of.
It’s in this arena that it really pays to know what you’re looking for — especially given the added risks of investing in the less liquid, more volatile world of small-caps.
Will small caps continue to outperform the titans of the FTSE 100? That’s impossible to say with any certainty. But going into 2016, I can tell you that with my own personal portfolio, I’m on the hunt for the market’s “Hidden” champions…
And from what I’m seeing… when you know where to look… there’s no shortage of compelling opportunities to be found.
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Mark Rogers has no position in any shares mentioned. The Motley Fool UK has recommended Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.