My 3 best-performing FTSE 100 stocks in 2023

The UK’s blue-chip index may not have performed strongly since the turn of the year but these FTSE 100 stocks most certainly have.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Illustration of flames over a black background

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I was checking the performance of my individual portfolio holdings recently. One thing that stood out was that a handful of FTSE 100 stocks was performing better than the wider index this year (it’s up 3.75%).

Here, I’m going to look at the top three. Each one is evidence that actively picking stocks can be a more lucrative strategy than index investing.

Rolls-Royce up 54%

First up, we have Rolls-Royce (LSE: RR). After surging 147% this year, this is the best-performing stock on the Footsie by a wide margin. Unfortunately, I only invested in it a few months ago, so my holding is ‘just’ up 54%.

The reason for investor enthusiasm lies with the aeroengineer’s ongoing turnaround under new chief executive Tufan Erginbilgiç. This strategy, built around cost-cutting, price rises, and the disposal of certain assets, is already bearing fruit. Cash flows are improving and margins have started to expand.

Net debt is coming down, though at £2.8bn at the end of June, this remains a concern. After all, making engines is a capital intensive business, so debt isn’t likely to disappear any time soon.

Still, I’m optimistic, especially as a full recovery in large engine flying hours could be on the horizon. This is important as Rolls makes money when its engines are in the sky. And management expects to reach between 80% and 90% of 2019 (pre-Covid) hours by the end of the year.

Also, margins should improve in its Power Systems division after recent price increases.

Overall, I find the prospect of a leaner Rolls-Royce firing on all cylinders an exciting one.

BAE Systems up 23.5%

Next, we have BAE Systems (LSE: BA.). The defence stock is up a 23.5% in 2023, building on its strong performance last year.

Unfortunately, the reasons for its ascent aren’t so celebratory. The shocking invasion of Ukraine 18 months ago sent military budgets soaring across the world.

As a result, BAE’s order backlog has grown to a record £66.2bn. In H1 2023 alone, it reported a massive order intake of £21.1bn.

This has left the company in a very strong financial position. Its dividend (yielding 2.7%) is covered two times by anticipated earnings. Plus, it recently announced the £4.35bn acquisition of the aerospace division of US firm Ball Corporation.

While this expands BAE’s presence in the space sector, it does increase the likelihood of taking on more debt. In a higher rate environment, this adds an element of risk.

Standard Chartered up 18.5%

Finally, we have Standard Chartered (LSE: STAN). The share price has climbed 20% in 2023. However, like Rolls-Royce, this is a stock that I only picked up during the course of the year (in April).

My purchase followed the collapse of Silicon Valley Bank in March, which sent the shares down 20%.

It was an opportunistic buy premised on the belief that the US regional banking crisis was unlikely to engulf StanChart, which has its core operations in Asia and Africa.

Of course, that’s not to say the stock is risk-free. The bank could see rising loan impairments in these emerging economies if a global recession were to develop.

However, on balance, I like the company’s long-term growth prospects as personal incomes rise in these regions. This backdrop should underpin share buybacks and a growing dividend.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ben McPoland has positions in BAE Systems, Rolls-Royce Plc, and Standard Chartered Plc. The Motley Fool UK has recommended BAE Systems and Standard Chartered Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

Could these beleaguered FTSE 100 stocks stage a turnaround?

Could these FTSE 100 stocks be primed for recovery after difficult times? Sumayya Mansoor takes a look at what could…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

Is this FTSE 100 giant one of the best income stocks out there?

Our writer takes a closer look at this medical business as a potential income stock for her portfolio, even though…

Read more »

Bournemouth at night with a fireworks display from the pier
Investing Articles

£2k in a Stocks and Shares ISA? One top stock I’d buy before the New Year!

Here's one US stock this writer thinks could grow for a long time to come and deliver attractive returns in…

Read more »

Front view photo of a woman using digital tablet in London
Investing Articles

How I’d invest £4k in my SIPP with the aim of doubling my money

Jon Smith talks through how he'd use dividend growth stocks to grow a SIPP pot consistently to achieve strong long-term…

Read more »

Stack of one pound coins falling over
Investing Articles

£3 a day vs £30 a day passive income plan

What’s the difference between a £3 a day and £30 a day passive income plan? More to the point, how…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

Is the British American Tobacco (BAT) share price NOW too cheap to miss?

The BAT share price has sunk again after another chilly market update. But is the company now a brilliant bargain…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

I’m using December to snap up cheap shares!

This Fool is keen to use this month to add some cheap shares to his portfolio. Here he examines one…

Read more »

Investing Articles

Could Rolls-Royce retain its share price gain and more?

The Rolls-Royce share price has impressed in 2023. I particularly like management’s fresh impetus on quadrupling profits and sustainable aviation…

Read more »