The FTSE 100 has done well in the last three months. Since late October, shares of the leading British index have risen around 15%. Investors have bid shares of the index up as they anticipate better economic times ahead thanks to Covid-19 vaccines.
While the FTSE 100 has done well, three stocks have done even better. Here’s more on three stocks that have absolutely crushed the Footsie since late October.
Next
Next (LSE: NXT) is a leading clothing retailer whose share price has surged over 25% in the last three months. Due to the rally, the Next share price is actually higher than pre-pandemic levels.
I think one reason for the rally is stronger-than-expected financial results. According to an early January trading update, full-price sales before Christmas were slightly better than last year. That’s a lot better than management’s previous expectation that sales would be down 8%.
Although many online users will revert to Next retail stores after the pandemic, I think many will continue to shop online. Online, I think Next will have more opportunities to create value in the future. It’s easier to target customers with ads/sales pitches online.
While Next shares have surged, the company’s success depends a lot on the strength of the British and Irish economies. Next has many stores in those regions. If they don’t do as well as expected economically, Next might not do as well either.
Glencore
FTSE 100 component Glencore (LSE: GLEN) is a commodity giant whose shares have surged over 50% over the last three months.
Given that China’s economy, which consumes a lot of commodities, has quickly recovered from the pandemic, Glencore is looking more attractive to many investors. China’s GDP rose 6.5% in the fourth quarter and Glencore is widely regarded as a leader in the sector given its portfolio of long-life, large-scale, and low-cost commodity assets. The company makes economically sensitive commodities such as copper that could see more demand if the global economy picks up strength.
In the long term, management believes the company is well positioned. According to the company, all decarbonisation pathways will need many of the commodities that Glencore produces. The commodities giant also benefits from the expected rise in the world’s population as it creates additional demand for metals and energy.
Like many commodity companies, Glencore has risk if commodity prices decline or if management doesn’t execute as well as the market expects.
HSBC
FTSE 100 stock component HSBC (LSE:HSBA) has rallied over 30% in the last three months.
The bank was previously a dividend investor favourite before regulators pressured management to suspend the dividend early last year. If HSBC pays a sizeable dividend again once the economy returns to normal, there is the possibility that it could find favour with many investors once again.
Of the three stocks, I think HSBC is the one that has the most value. HSBC is trading well below book value, with a price-to-book ratio of 0.59. With the potential Biden stimulus and strong Chinese economy, I think there’s potential for even further rallies.
Like other financial stocks, HSBC faces risk if growth isn’t as strong in Hong Kong and in other regions of the world as analysts predict. HSBC could also decline if investor sentiment weakens.
