It’s happy days for Marks and Spencer (LSE: MKS). The stock rejoined the FTSE 100 last month after a banner year. It might even go down as the success story of 2023.
I covered the stock earlier this year when it was on the FTSE 250. It struck me as a certainty to rise to the higher index, but the retailer shocked me with how early it earned promotion.
My question then: if I’d invested £5k in Marks and Spencer stock while it was still on the FTSE 250, what would I have now?
Now, to answer, I need an entry point. The firm was on the lower index for four years so I’ve got plenty of points to choose from, and I’d say there are two that give the most interesting answers.
I’ll start with the low point, and to be clear, low might be understating things here. This wasn’t a brief dalliance with the FTSE 250, the share price truly collapsed. At their lowest, the shares fell to only 85p each, this from an all-time high of £7.11. That’s quite a tumble.
If I’d invested £5k at that low point – which was during the 2020 Covid crash – I’d now have £13,106. That’s a superb return. I would have nearly tripled my money in three years or so.
Now, I have to say that would have been quite some stock pick. The British high street had already suffered the collapse of Woolworths, BHS, and more. Then Covid came along, dealing a heavy blow to Debenhams and Arcadia and making physical stores look like an awful investment. Anyone who saw M&S as a good buy, well, kudos to them.
An excellent investment
Buying at the low point would have been something of a ‘best case scenario’, so let’s try another entry point. I think the start of 2023 makes sense. Covid lockdowns were over at this stage and the firm looked on course to beat pre-pandemic revenue and earnings. It looked like a good value play.
If I’d invested £5k then – on January 1 this year – I’d now have £8,796. That’s around a 75% increase on my stake in only nine months or so. Still an excellent investment and one I wish I’d made.
Sadly, I didn’t buy the stock at any point and still don’t hold any. But the momentum looks good here, so am I going to buy today for future returns?
A buy?
Well, the good news keeps rolling in. The first 19 weeks of its year showed a 6% increase in Clothing revenue and an 11% increase in Food. The retailer plans to pay dividends again by the end of the year — likely a 3% yield or thereabouts — which makes the stock look more attractive too.
But on the other hand, I can’t ignore the declining nature of the British high street. The recent Wilko collapse brings this sharply into view. The uncertainty here is just enough to put me off buying, for today at least. I’ll keep it on my watchlist.
