An old stock-market expression says, “As goes January, so goes the year”. Thus, when the FTSE 100 goes up (or down) in January, it may also do so in that year. In 2020, that’s certainly been the case so far.
The FTSE 100’s January wobble
At the start of 2020, the FTSE 100 was riding high, hitting its 2020 peak of 7,675 on Friday, 17 January. Then stocks slipped, with the index ending January down 4.2%.
Then news emerged of a fatal virus spreading outwards from China. Covid-19 has killed over 500,000 people worldwide and the pandemic is not yet over.
The FTSE 100 collapses
On 2020’s first trading day, the FTSE 100 closed above 7,600 points. At its low on Monday, 23 March, the index crashed below 5,000. Indeed, the FTSE 100 lost a stunning 35% of its value in under 12 weeks.
2020: A game of two halves
However, 2020 has been a game of two halves. After a first quarter ranking among the worst market crashes, share prices surged after 23 March.
The FTSE 100 now hovers around 6,187, up almost a quarter (24%) from its 2020 low. Despite this dramatic comeback, the FTSE 100 has had a gruesome half-year, down almost a fifth (18%) in 2020.
Some falls are bigger than others
In highly volatile markets, some stocks soar sharply, while others slide steeply. Examining the FTSE 100 today, I count 25 shares that are up in 2020, including six ahead by more than 20%. Shareholders in these 25 out-performers have had a great year, but it’s bad news for the rest.
Of the remaining 75 shares, first-half losses range from a tiny 0.1% to a massive 63%. Worst still, these 75 losers include 24 stocks down more than 30%. Ouch.
The FTSE 100’s dogs of 2020
If you own a significant shareholding in any of the following FTSE 100 firms, then your portfolio may have suffered a nasty knock. This table lists the share-price loss of the FTSE 100’s six biggest fallers in 2020:
International Consolidated Airlines -63.1%
Rolls-Royce -57.6%
Melrose Industries -51.4%
ITV -51.1%
Lloyds Banking -50.0%
Royal Bank of Scotland -49.6%
Five of these six slumpers are familiar household names; Melrose Industries (#3) owns various manufacturing and engineering businesses. It’s no surprise to see IAG in the top spot of these FTSE 100 dogs, as it owns airlines including British Airways, Iberia, and Aer Lingus. Likewise, the future of Rolls-Royce depends on a return to profitable air travel.
As for ITV, its shares have more than halved this year, so I can see value in this business, especially as a takeover target for a larger media conglomerate. Dogs #5 and #6 are both banks. Clearly, being a huge lender and riding out the steepest recession for three centuries is not ideal. That explains why Lloyds and RBS shares have halved this year.
Which FTSE 100 dog would I buy?
If forced to own one of these six dogs, I would buy Lloyds shares. As I wrote two weeks ago, Lloyds has been an awful share to own since 2007, but it survived the global financial crisis and it will conquer Covid-19. While I would expect zero dividends in 2020–21, Lloyds will find a way through this crisis. I’d buy its shares for long-term capital growth and for an eventual return to dividend payouts.
