Currently, the FTSE 100 index is enjoying its best-ever start to January since it launched in 1984. On Thursday, the Footsie closed at 6,857, up almost 400 points (6.1%) in four trading days. Alas, the index didn’t have a great 2020, diving almost 1,100 points — down a seventh (14.3%). However, the share performances of individual Footsie members were very widely dispersed last year. Let’s find out more about the best shares to buy (and the worst) from the FTSE 100 12 months ago.
2020’s winners and losers
Get ready for a surprise. Though the FTSE 100 dived in 2020, half (50) of the index’s 100 shares actually rose in value over 12 months. These gainers recorded rises ranging from a tiny 0.1% to a whopping 113.4%. The mean average gain across all 50 risers was just over a quarter (26.6%). If your portfolio consisted only of these 50 stocks, I applaud you for finding the best shares to buy.
Thus, this leaves 50 FTSE 100 stocks that lost value last year. Theses losses range between a modest 0.6% and a crushing 62.1%. The mean average decline across all 50 losers was close to a fifth (18%). These 50 were definitely not the best shares to buy 12 months ago.
The five best shares to buy 12 months ago
Among the 50 FTSE 100 risers over the past year were 20 shares that rose by a quarter (25%) or more. Of these, eight rose by more than half (50%). And these five stocks were the FTSE 100’s best shares to buy in January 2020:
Scottish Mortgage Investment Trust 113.4%
Ocado Group 88.4%
Pershing Square Holdings 78.6%
Antofagasta Holdings 74.3%
The top share on the list is SMIT, an investment trust with heavy exposure to high-flying US tech stocks. Its investments in the likes of Tesla, Amazon and Alibaba have turned SMIT into a top-performing fund over one, three, five and 10 years. But I see trouble ahead for SMIT, as I view many of its core holdings as being deep into bubble territory. Although it was the FTSE 100’s best share to buy a year ago, I wouldn’t touch it today. Likewise, I view profit-avoiding online grocer Ocado Group as an over-valued hype stock or bubble share. It also won’t go into my ISA.
Fresnillo is an Anglo-Mexican silver and gold miner. Its share price bounced back strongly last year, after collapsing 70% between mid-2016 and 2020. But this stock combines a lofty price-to-earnings ratio with a tiny dividend yield, so it’s not my best share to buy. Chilean copper miner Antofagasta has a similar lofty valuation to Fresnillo, so it’s not for me.
My top stock from these five winners
For me, the best share to buy from 2020’s FTSE 100 winners is Pershing Square Holdings (PSH). This Guernsey-registered investment trust tracks the performance of Pershing Square Capital Management. This hedge fund is run by Bill Ackman, a billionaire investor known for placing massive conviction trades. I’m a big fan of Ackman, an activist who isn’t shy about courting controversy or attacking poorly run companies.
At today’s closing price of 2,650p, PSH shares trade at a discount of almost a quarter (22.8%) to their underlying NAV (net asset value). For me, that’s far too wide a gap for this high-flier. That’s why I’d happily pick this as my best share to buy for 2021 from these five winners!
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Alibaba Group Holding Ltd., Amazon, and Tesla. The Motley Fool UK has recommended Fresnillo and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. 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.