Please cast your mind back to the grim days of autumn 2020. This was before news of several effective Covid-19 vaccines gave us hope, fuelling sharply rising share prices in November. After leaping from Meltdown Monday (23 March 2020) to early June, the FTSE 100 index then dived as Covid-19 infections surged. By 30 October, the FTSE 100 had slumped to a second-half closing low.
But which were the best shares to buy from the FTSE 100 six months ago, before the light at the end of the coronavirus tunnel?
The FTSE 100 soars on vaccine news
On 30 October 2020, the FTSE 100 closed at 5,577.30 points, having lost over 900 points (14%) since 5 June. Today, the Footsie stands at 6,737.22. That’s an increase of almost 1,160 points in five months, up more than a fifth (20.8%). In other words, Halloween horrors have been replaced by happier times since. But what if I had a time machine and could go back six months, before the stock market bottomed out? Which would have been the best shares to buy from the FTSE 100 (my hunting ground for large-cap value shares)?
Winners and losers since 30 September
I’ll go back six months to 30 September 2020 (exactly one month before the autumn market low). Which would have been the best shares to buy then and hold until today?
Of the 101 shares in the FTSE 100, 77 of these stocks have risen over the past six months. Gains among these 77 winners range from a tiny 0.5% to a whopping 137.7%. Across all 77 gainers, the average rise is a healthy 33.2% (almost exactly a third). Among the 24 FTSE 100 losers over six months, losses range from a teeny 0.1% to an unpleasant 25.4%. The average loss across these 24 fallers was 11.8%. Now let’s find out the five best shares to buy from the FTSE 100 six months ago.
The FTSE 100’s best shares to buy
As is so often the case, the most beaten-down stocks have enjoyed the biggest rebounds over the past half-year. From the FTSE 100, these were the five best shares to buy on 30 September 2020 and own until today:
Rolls-Royce Holdings (aero-engine maker) +137.7%
International Consolidated Airlines Group (airlines) +102.3%
Barclays (banking) +84.8%
NatWest Group (banking) +78.9%
Glencore (mining and commodity trading) +76.9%
The best shares to buy six months ago were so-called ‘recovery plays’. These are companies seen as most likely to benefit from a post-Covid-19 recovery. There are three simple themes here. First, Rolls-Royce and ICAG were absolutely hammered in 2020, as airmiles flown collapsed to levels not seen in many a decade. But a vaccinated world will be eager to resume international air travel. Second, as two of the UK’s leading lenders to businesses and consumers, Barclays and NatWest took a savage beating before bouncing back. Third, Glencore‘s share price has surged as commodity prices have soared on hopes of a strong economic recovery.
To be honest, with RR and ICAG facing an existential crisis, I would not have bought these risky shares six months ago. As a veteran value investor, these stocks were too risky for me. However, I repeatedly wrote about Barclays and NatWest last autumn, identifying both banks as being value plays. Of course, I’m delighted with their performance since October 2020. As for the best shares to buy for the next six months, I don’t have a crystal ball, so you tell me!
