Only two investments in the UK’s FTSE 100 would have doubled investors’ money in 2023.
And there were some major surprises.
The 100 largest businesses on Britain’s richest index are together worth £1.8trn.
Most are here because of steady progress over decades. They are not famed for rapid earnings growth, or price volatility.
But one turnaround stock has nearly tripled since January 2023. And one previously slow-growth plodder suddenly roared to life.
So which bucked the trend and doubled their share price this year?
1: Rolls-Royce: up 194%
One of Britain’s oldest companies is aerospace giant Rolls-Royce (LSE:RR). It makes engines for the commercial Airbus A380 and Boeing 777, as well as for military craft and helicopters.
I’ve written several times this year praising CEO Turfan Ergenbilic. He came in from BP with an aggressive strategy to quadruple profitability.
From a beaten-down share price of 98p on the first day of the year, the company is now trading at just under 300p.
Cutting 2,500 staff from the 42,000 employee roster in October means Rolls-Royce will go into 2024 a leaner beast. Ergenbilic has also unveiled plans to sell off the company’s unprofitable electric aircraft engine arm to raise up to £1.5bn to pay down debt.
This should reduce any drag on earnings. And Rolls-Royce says its income will boom by 51% in 2024. So while a price-to-earnings ratio of 24 looks expensive on the surface? I think earnings growth is the more important value metric to watch.
2: Marks and Spencer: up 107%
A seller of luxury underpants and fancy cakes is not the first place I’d look for rising stars, to be honest. But Marks and Spencer (LSE:MKS) outperformed 98% of the FTSE 100 in 2023.
From less than 130p in January, the shares are now changing hands for 265p.
How has the high-street retailer profited amid a cost-of-living crisis? Sales jumped 11% in the first six months of the year. But the critical number is net income, up 25% from 2022.
Swift and effective cost-cutting, along with dragging M&S into the 21st century, has worked a blinder.
CEO Stuart Machin came aboard in May 2022 and revealed plans to shutter 67 of the 247 physical stores.
And a shift to online sales has pumped profit margins to 5.6% from just 2.5% in 2020.
The firm is also sitting on a cash pile of £838m. And earnings per share will grow 16% in 2024, analysts say. So there may be more runway for the share price to blossom, if they are right.
How to have a very good year
What about a plan to buy a FTSE 100 index ETF that bundles together and tracks the value of all 100 companies together?
It’s probably the lowest-effort option for most.
But it’s clear to me that over-diversification can be a major wealth-destroyer.
The FTSE 100 climbed a modest 0.4% between 1 January and 15 December 2023. But UK consumer price inflation averaged 8.07% in 2023.
So this strategy would lose 8% of the purchasing power of my cash in the year, adjusted for inflation.
Instead, I’ll follow a handful of good companies with beaten-down share prices to aim for my simplest, long-term, repeatable gains.
