Despite the ongoing economic climate, many FTSE 100 shares are hitting their highest points in the last year.
The UK’s flagship index as a whole is currently sitting near 7,500 points versus 6,800 in October 2022. And while that’s not as high as the 8,000 achieved in February, a very different story emerges when looking at some of its constituents.
Top 10 performing stocks
A roughly 10% jump in index value is certainly nothing to scoff at. But it pales in comparison to the performance of some FTSE 100 shares these past 12 months.
| Name | Industry | 12-Month Return |
|---|---|---|
| Rolls-Royce | Aerospace & Defence | +216% |
| Marks & Spencer | Consumer Staples | +131% |
| Centrica | Energy | +114% |
| B&M European Value Retail | Consumer Staples | +88% |
| 3i Group | Financial Services | +82% |
| Hikma Pharmaceuticals | Healthcare | +69% |
| Associated British Foods | Consumer Staples | +62% |
| Melrose Industries | Aerospace & Defence | +55% |
| Whitbread | Travel & Leisure | +47% |
| Howden Joinery | Construction Materials | +47% |
Each of these businesses has achieved impressive double- and triple-digit returns for a variety of reasons:
- Rolls-Royce appears to have made a stellar comeback from near bankruptcy
- B&M is proving to be an essential value shopping location as the cost-of-living crisis squeezes household finances
- Howden Joinery is reaping the tailwind of families being stuck in households longer than anticipated, sparking a desire for kitchen renovations
However, after such impressive growth, is there much room left for them to climb higher?
Too late to buy?
While there are some similarities, most of these businesses are driven by different forces. For example, a global pharmaceuticals giant like Hikma is less likely to be affected by a consumer spending slowdown versus a hotel operator like Whitbread. After all, if someone is sick, medicine is usually last on the chopping block from a household budget.
Therefore, to determine whether the buying opportunity has passed, investors need to carefully investigate each business and try to understand exactly what triggered the recent upward momentum.
Is it just short-term hype? Or is the company successfully stealing market share from competitors? If it’s the latter, then perhaps the recent share price boost is just the tip of the iceberg in the long run.
Having said that, even the most promising business can turn out to be a bad investment if the wrong price is paid. Estimating intrinsic value is a tricky process, even for experienced investors. An alternative is relative valuation, which utilises financial metrics such as the P/E ratio and compares them against industry averages to determine whether a buying opportunity has emerged.
But even if a specific company is now trading at a lofty valuation, that may change. Therefore, if it seems too late to buy a certain stock now, investors may want to keep it on a watchlist in case shares decide to take a tumble later down the line.
