Shares in Royal Mail, the UK postal service provider, outperformed all but two S&P 500 firms over the past year. This is according to new research from trading platform eToro. The findings suggest that despite general apathy towards the UK as an investment destination, the market still offers potentially lucrative opportunities for investors.
So, what’s behind the good performance of Royal Mail shares? And can you buy shares in the company? Let’s take a look.
How have Royal Mail shares performed?
Data compiled by eToro shows that Royal Mail and other domestic firms significantly outperformed most of the firms on the famous US stock index, the S&P 500 over the past year. In fact, Royal Mail delivered better returns than all but two stocks on the S&P 500 index.
The data shows that Royal Mail garnered investors a 189% return. This is better than the returns of big stocks on the benchmark US index like Apple (+28%), Microsoft (+41%), Alphabet (+82%) and Netflix (+14%).
What’s behind the strong performance of Royal Mail?
Royal Mail’s outstanding performance has been fuelled by a surge in parcel deliveries. During the pandemic, people shopped online and had more parcels delivered to their homes.
So high was the rise in demand for parcel deliveries that the firm actually reported a four-fold rise in its annual profits during the year of Covid-19.
Not surprisingly, the company’s good performance at the height of the pandemic when other publicly traded firms were struggling led to positive investor sentiment that resulted in a soaring of the firm’s share price.
Royal Mail was not the only UK firm to outperform most of the S&P 500, however.
Other local stocks that were also on a tear in the past year and that outdid most S&P 500 firms include Ashtead, Entain (owner of Ladbrokes), NatWest Group and Glencore.
What’s the takeaway for investors?
The performance of Royal Mail and other UK firms serves as a reminder that the domestic market still has the potential to provide good returns and help investors build wealth.
It’s no secret that the UK hasn’t always been the most popular investment location among investors.
According to research from eToro, when asked which market presented the best buying opportunities for the rest of 2021, just 14% of investors chose the UK. In comparison, 39% of investors see the US as offering the best opportunity, 38% prefer Europe and 24% prefer China.
Analysts point to the uncertainty around Brexit and massive economic contraction during the pandemic as some of the factors that have might put investors off UK stocks.
However, as Royal Mail demonstrates, there are still some fantastic and exciting gems in the UK stock market. Buying UK stocks right now can give you exposure to an economy that has great momentum behind it.
Experts are actually saying that the UK economy will outpace many of its peers next year. As the economy continues to recover and grow, so will consumer confidence and spending. Companies earnings could shoot up and many others may follow in the footsteps of Royal Mail in delivering good returns to their investors.
Can you buy shares in Royal Mail?
Are you interested in Royal Mail shares, or perhaps the shares of other domestic companies that have performed well? If so, it’s relatively easy to buy them.
As it’s a public traded company, all you need to buy Royal Mail’s shares is a share dealing account. If you don’t have one already, check out our comparison of some of the top share dealing accounts in the UK.
Just remember that past performance does not dictate future results. Stocks can fluctuate in value, and you may get back less than you put in. Thoroughly research and analyse your potential investment to determine whether it has good long-term potential.
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