These are the 3 biggest FTSE 100 winners in 2018. Read this before you buy any of them

Harvey Jones names the big winners on this year’s FTSE 100 (INDEXFTSE: UKX), but with a warning about the future.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It may have been a rough year for the FTSE 100, which is down 10% in 2018, but not every stock has fallen with it. The following three have had a fine old time. Can they repeat the trick next year?

1. Ocado Group

And the 2018 winner is… Ocado Group (LSE: OCDO). It’s up a massive 99% in the past year, as it morphed from a grocery play into a tech stock by striking significant deals to license its technology to overseas grocery chains, notably Kroger in the US, and Casino in France.

Ocado has been dubbed the Microsoft of the retail sector, quite some accolade. However, its market-cap is now almost £6bn and its share price is unlikely to keep growing at the same pace next year, especially valued at a mind-boggling 4,686.3 times earnings.

Ocado could go either way from here. CEO Tim Steiner recently hailed “a transformative year for Ocado”, and said the story has only just begun. My Foolish colleague Paul Summers said the group’s share price scared him in July, and it’s fallen 27% since then. Take your pick, but it’s too pricey for me.

2. Evraz

2018’s second-best performing stock, Russian steel miner Evraz (LSE: EVR), has only delivered a third of Ocado’s growth to rise 37% over the year. But that’s still a pretty handsome return. 

This is also a dividend monster, currently yielding 5.1%, which is forecast to hit 13.7% in 2019 (with cover of 1.6). Incredibly, you can buy at a rock bottom valuation of just 4.5 times earnings. As Kevin Godbold recently noted, this is starting to look like a super stock.

Yet Evraz has also slumped lately, falling 17% in the last three months. That’s due to global volatility and a disappointing Q3 update that included a 10% drop in crude steel output, due to lower pig iron production.

Commodity stocks tend to be cyclical, and with global and Chinese growth slowing demand for steel, it could fall next year. The group is also funding a large capital investment programme, costing between $830m and $990m a year over the next three years. Earnings per share have grown 167% this year, but in 2019, analysts are pencilling in a 23% loss. Maybe that’s the time to buy Evraz.

3. Pearson

Educational publisher and training group Pearson (LSE: PSON) is the surprise FTSE 100 package of 2018, rebounding 25% after inflicting years of misery on shareholders. This is a tough sector under technological attack. As US demand for its print textbook collapses, Pearson’s management has responded well by digitising its own operations.

Having previously suggested that this was a company in structural decline, as the rise of Open Education Resources (OER) in the US makes it easier for universities to share course material, this year’s recovery took me by surprise. However, a closer look at the account shows that revenues are forecast to remain flat, or falling.

Pearson is a company in recovery and, having missed out the early stages of the rebound, I’m reluctant to climb on board now. Especially with the stock trading at a fairly-valued 15.2 times earnings, and with earnings expected to drop 5% in 2019.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Happy parents playing with little kids riding in box
Investing Articles

A 9.7%-yielding FTSE 100 dividend gem that could create generational wealth

A sizeable investment pot that can be passed onto the next generation could be built with much smaller investments over…

Read more »

Investing Articles

Up 31%, do Lloyds shares have more to give?

Shares in major FTSE 100 bank Lloyds are on a charge. But what could be in store for the stock?…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Time to sell this FTSE 100 underperformer, says Goldman Sachs

Analysts at one investment bank have a ‘sell’ rating on FTSE 100 stock Diageo. But could a short-term weakness in…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Down 5%, Glencore’s share price looks a serious bargain to me now

Glencore’s share price looks undervalued to me, supported by strong earnings growth prospects and the potential resumption of extra shareholder…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

I’d invest £6,580 in this FTSE 250 REIT for £500 passive income

This FTSE 250 renewable energy enterprise is on track to become a Dividend Aristocrat! Here’s how I’d invest to earn…

Read more »

Investing Articles

Buying 1,000 of some dividend shares today unlocks £45 in weekly passive income!

These shares are among the biggest dividend payers in the FTSE 100. Should investors be buying them now to earn…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

If I’d put £5k in index funds 5 years ago, here’s what I’d have now

Investing in index funds is an excellent way to grow wealth with minimal effort. But how much money can investors…

Read more »

Investing Articles

10.2% yield! 1 of the top income stocks to buy in July?

A 10% yield's pretty rare, but this firm's been growing shareholder payouts for nine years! Does that make it one…

Read more »