While some UK shares have started slipping in recent weeks, the British stock market as a whole has still delivered an impressive near-20% return over the last 12 months. And when zooming out to the last five years, these gains are even more impressive.
But how much money have investors actually made?
Five-year returns of UK shares
Let’s say someone put £5,000 to work five years ago in April 2021. The amount of money they have today ultimately depends on where they decide to invest this capital.
| Index | 5-Year Total Return | Investment Value |
| FTSE 100 | +78.2% | £8,910 |
| FTSE 250 | +14.1% | £5,705 |
| FTSE All-Share | +65.7% | £8,285 |
Looking at the results, it seems that quality large-cap stocks have stolen the show, with mid- and small-cap shares lagging.
There are several explanations behind these patterns. Smaller businesses are typically more dependent on domestic economic conditions, with larger players often generating the bulk of their revenue from overseas. And it’s no secret that the UK economy isn’t exactly in terrific shape at the moment.
However, that doesn’t mean that UK small-cap shares have been bad investments. For smart stock pickers, this area of the stock market has generated some very lucrative gains that have even outpaced the FTSE 100. And one such example is Goodwin (LSE:GDWN).
Even after a recently dramatic sell-off, the once-small-cap stock has still surged by almost 300%. And for anyone who’s been reinvesting dividends paid along the way, that total return has been closer to 360%, transforming £5,000 into a staggering £23,000!
So the question now, following the sell-off, is whether a rare buying opportunity has emerged for this high-quality compounder?
What’s going on with Goodwin?
Following a recent trading update, Goodwin shares collapsed by close to 48% in a single day.
The cause? The update revealed that two significant contract tenders worth roughly £60m were unexpectedly lost. And when compounding this with the impact of order delays coming from the Middle East, management signalled its intention to revert to a more cautious dividend policy. Obviously, that isn’t good news.
But it’s worth pointing out that even with the update, the group’s underlying order book is still pretty substantial. At the same time, the defence and nuclear power tailwinds Goodwin’s been riding are still very much intact.
The sudden contract losses undoubtedly raise some questions about Goodwin’s competitive positioning. But two contract losses aren’t enough to determine a structural rather than a one-off problem.
As such, seeing the market-cap effectively chopped in half definitely seems like an extreme overreaction. However, it’s worth highlighting that Goodwin shares were trading at a massive premium of over 40 times earnings.
Today, with the price-to-earnings ratio now sitting closer to around 22, investors may be looking at an attractive entry point for what is still one of the best-performing UK shares of all time. That’s why I think now’s the perfect time to investigate and mull this potential buying opportunity.
