As we draw to the end of another, shall we say, ‘interesting’ year on the markets, the masochist in me always makes a point of looking to see what stocks I really should have bought at the beginning of 2021. Here are three from the FTSE 100.
Consumer Care and Life Sciences company Croda International (LSE: CRDA) has gained 51% in value in the year to Christmas Eve. That makes the stellar 12% rise in the FTSE 100 look almost pedestrian. Much of this momentum has been due to the company managing to exceed analyst expectations on profit over the year. The question is, can this continue?
I’m certainly optimistic. Having now agreed to sell the majority of its Performance Technologies and Industrial Chemicals businesses, Croda intends to move into “faster growth areas” such as healthcare and become a leader in the cropcare market. These moves, according to CEO Steve Foots, will see the company generate “consistent sales growth and an even stronger profit margin”.
The only problem is that Croda now trades on a punchy valuation of 39 times forecast FY22 earnings. As such, I’d be very surprised if the company manages to replicate 2021’s gains.
Nevertheless, this remains a great stock, in my opinion. If I were looking to build a FTSE 100-focused portfolio for the long term, CRDA would easily make the shortlist. One to buy on dips perhaps?
Next up is mining and commodities trader Glencore (LSE: GLEN). Its shares have climbed 52% in 2021, so far. Again, this is evidence that picking your own stocks has at least the potential to vastly outperform the market. It also shows that winners can come from multiple, very different sectors.
Glencore’s streak can be attributed to the growing demand for commodities like copper and, more recently, oil. In fact, the company’s interest in the former could continue to be very lucrative in the years ahead as the adoption of electric vehicles and renewable energy gathers pace.
Of course, one issue with Glencore is that its fortunes are, to some extent, beyond its control. Commodity prices can quickly reverse and this leaves me skeptical that the stock will repeat this year’s performance in 2022.
Then again, it might be argued that the potential income on offer more than makes up for this. A 6.8% yield for FY22 is currently forecast. Shares also trade at just 7 times earnings.
A final FTSE 100 stock that’s done the business for holders in 2021 has been equipment hire business Ashtead (LSE: AHT). Its value has climbed a stonking 72% year to date as rental revenues have soared to record levels.
Naturally, such a run of form could lead to some profit-taking in 2022. The seemingly never-ending pandemic could also cause a slowdown in trading if projects end up being delayed due to safety concerns. However, a forward P/E (price-to-earnings) ratio of 25 doesn’t feel excessive, given the consistently high margins Ashtead achieves.
The outlook is bullish too. With the construction industry in rude health following a post-lockdown rise in demand (not to mention Joe Biden’s infrastructure bill), I don’t doubt the good times can continue for the £27bn-cap.
Another 72% next year? Probably not. However, this is another stock worth keeping in the bottom drawer, in my opinion.