It may have been a rough year for the FTSE 100, which is down 10% in 2018, but not every stock has fallen with it. The following three have had a fine old time. Can they repeat the trick next year?
1. Ocado Group
And the 2018 winner is… Ocado Group (LSE: OCDO). It’s up a massive 99% in the past year, as it morphed from a grocery play into a tech stock by striking significant deals to license its technology to overseas grocery chains, notably Kroger in the US, and Casino in France.
Ocado has been dubbed the Microsoft of the retail sector, quite some accolade. However, its market-cap is now almost £6bn and its share price is unlikely to keep growing at the same pace next year, especially valued at a mind-boggling 4,686.3 times earnings.
Ocado could go either way from here. CEO Tim Steiner recently hailed “a transformative year for Ocado”, and said the story has only just begun. My Foolish colleague Paul Summers said the group’s share price scared him in July, and it’s fallen 27% since then. Take your pick, but it’s too pricey for me.
2018’s second-best performing stock, Russian steel miner Evraz (LSE: EVR), has only delivered a third of Ocado’s growth to rise 37% over the year. But that’s still a pretty handsome return.
This is also a dividend monster, currently yielding 5.1%, which is forecast to hit 13.7% in 2019 (with cover of 1.6). Incredibly, you can buy at a rock bottom valuation of just 4.5 times earnings. As Kevin Godbold recently noted, this is starting to look like a super stock.
Yet Evraz has also slumped lately, falling 17% in the last three months. That’s due to global volatility and a disappointing Q3 update that included a 10% drop in crude steel output, due to lower pig iron production.
Commodity stocks tend to be cyclical, and with global and Chinese growth slowing demand for steel, it could fall next year. The group is also funding a large capital investment programme, costing between $830m and $990m a year over the next three years. Earnings per share have grown 167% this year, but in 2019, analysts are pencilling in a 23% loss. Maybe that’s the time to buy Evraz.
Educational publisher and training group Pearson (LSE: PSON) is the surprise FTSE 100 package of 2018, rebounding 25% after inflicting years of misery on shareholders. This is a tough sector under technological attack. As US demand for its print textbook collapses, Pearson’s management has responded well by digitising its own operations.
Having previously suggested that this was a company in structural decline, as the rise of Open Education Resources (OER) in the US makes it easier for universities to share course material, this year’s recovery took me by surprise. However, a closer look at the account shows that revenues are forecast to remain flat, or falling.
Pearson is a company in recovery and, having missed out the early stages of the rebound, I’m reluctant to climb on board now. Especially with the stock trading at a fairly-valued 15.2 times earnings, and with earnings expected to drop 5% in 2019.
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harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. 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.