These three shares are among the best performing shares from the FTSE 350 in the past year. The big question now is will that momentum continue or will 2021 not be so good?
A high-flying FTSE 350 share
Shares in the investment trust that has backed Tesla, Scottish Mortgage Investment Trust (LSE: SMT), have risen over 100% this year. I think this is the one of the three top-performing 2020 shares that can continue its form into next year.
The big concern would be, of course, if sentiment turns against technology stocks. A Biden clampdown on big tech could be one trigger that would hit the value of companies like Amazon, which the trust holds.
Overall, I’m a fan of investment trusts as they hold a pool of investments in other companies, so are less risky. That’s even more important in these difficult times. The managers have a very strong track record and so should continue to be backers of innovative companies. In an increasingly digital and complex world, the trust can continue to back high-growth tech-focused companies.
Spectacular to date, but overdone now?
Online retailer AO World (LSE: AO) is another share that has been boosted by the pandemic. The share price is up nearly 400% this year. In the six months to 30 September, the retailer swung to a pre-tax profit of £18.3m. It had made a loss of £5.9m in the same period a year ago. Revenues were up 53.2% to £717m.
The stock now has one of the highest P/E ratios for a large UK company at over 1,000. Overall I don’t think the business really deserves such a premium. Any performance from here that isn’t knocking the ball out of the park is likely to see the share price fall. For me now, there’s no point buying the share. There’s a lot of risk in the share price and the biggest rewards for shareholders are in the past, not the future.
AO World feels like it was in the right place at the right time, rather than being particularly innovative in its own right.
A sometimes volatile share
CMC Markets (LSE: CMCX) is a spread-betting company that has been boosted by the stock market volatility this year. It has also benefited from new investors becoming interested in stocks and from having a strong technology focus to its business. Earlier this year when other companies cut their dividends, CMC Markets increased its payout by 640%.
I expect the stock market will be volatile for some time, so CMC Markets is well placed to keep delivering for investors. As always though with a spread-better, you need to be prepared to ride out the ups and downs. It’s a good company though. It’s run well with a founder still in charge and with a significant shareholding. This means management’s interests are well aligned to those of shareholders.
CMC Markets is a top performer from 2020 that I might be tempted to buy for 2021.
