We’re at the halfway point of 2023 and it’s been a mixed year for the FTSE 100. The index as a whole has been relatively steady, but some individual stocks have been making big moves.
Against a backdrop of high inflation, rising interest rates, and a banking crisis, it’s been a really interesting year so far in the stock market. Here are the best and worst from the FTSE 100.
Winner: Rolls-Royce
Since the start of the year, the Rolls-Royce (LSE:RR) share price has increased by around 70%. That makes it the best-performing stock in the FTSE 100.
The biggest catalyst for this has been the ending of pandemic restrictions around the world. This hasn’t just happened in 2023, but the effects are starting to be felt in the stock market.
Increased travel demand has enabled a recovery in the company’s engine servicing revenues. And that in turn has given the stock an enormous boost.
On February 23, the company announced earnings for the previous year. With £652m in underlying profit and free cash flow from continuing operations up by £2bn, these came in much higher than expected.
In the two weeks that followed, the Rolls-Royce share price jumped 46%, accounting for almost all of its gains this year. Since then, it has been steadily trading around £1.58.
Loser: Fresnillo
Until recently, this section was all set to be about Ocado. But a 30% surge following the takeover rumours from Amazon.com means there’s a different stock at the bottom of the FTSE 100 pile.
Instead, it’s Fresnillo (LSE:FRES) that takes the award for the biggest share price decline. Since the start of the year, the stock has fallen by 30%.
Fresnillo is the world’s largest silver miner. For commodities producers, the business equation is fairly simple – extract as much as possible, keep costs down, and hope prices stay high.
Recently, Fresnillo has been struggling with all of these. Lower silver prices, decreased gold volumes, higher input costs, and increased employment expenses have been pressuring the business from all sides.
On top of that, the company has faced delays in getting power to expansion projects at two of its mines. As a result, Fresnillo has had to halve its dividend and the stock has been falling.
Stock(s) to buy?
Share price fluctuations can often make for interesting buying opportunities. So is there a buying opportunity in either stock at the moment?
With Rolls-Royce, the business seems to be rallying well. And the new CEO’s drive for efficiency should – if successful – put the operations on a decent footing for the long term.
Despite this, the company’s balance sheet concerns me. While a lot of its debt isn’t due for several years, I still see it as a significant issue that will weigh on investment returns for some time.
Fresnillo, on the other hand, looks like an interesting proposition to me. At the moment, it seems to be facing a perfect storm of headwinds in various different parts of its business.
Times of maximum pessimism can be good opportunities for investors, though, especially when the headwinds are likely to be temporary. As a result, I have Fresnillo firmly on my watch list.
