Companies with the strength to invest in their business have led the charge in 2012, but few funds have benefitted from the rise of the FTSE’s top-performers.

While in 2011 the flight to perceived quality amid stock market turmoil saw defensive stocks such as British American Tobacco and GlaxoSmithKline top the tables, this year it is the strength of the corporate sector rather than sentiment that has asserted itself. 

Data from FE Trustnet shows that Admiral, Intercontinental Hotels and Whitbread are among the top performers so far this year, with gains of 40 per cent, 33.7 per cent and 29.7 per cent respectively. 

Ten best-performing FTSE stocks in 2012

Stock	Returns (%)
Admiral Group	40
Intercontinental Hotels	33.7
Old Mutual	30.9
Whitbread	29.7
Intertek Group	26.6
International Power	25.5
Legal & General	23.4
Hammerson	22.1
Aberdeen Asset Management	20.2
Hargreaves Lansdown	20.2

Source: FE Analytics

Richard Hunter, head of UK equities at Hargreaves Lansdown, says that the biggest winners so far this year have performed well for stock specific rather than economic reasons. 

"Given the current climate, Intercontinental Hotels is not a name that you’d expect to see up there," he said.

"But they’ve been benefitting from growth in their business in emerging markets. They’ve opened up 48 new hotels in Asia during the first quarter of this year, including their first Holiday Inn in Thailand." 

"Whitbread has also been investing heavily in its business this year. The Costa Coffee and Premier Inn brands have been doing very well indeed." 

Managers have been reluctant to back sectors such as leisure and consumer services even during the strong rally at the start of the year because many still feel the pinch of relatively high inflation, austerity measures and low growth. 

Data from FE Analytics shows that just four funds list Intercontinental Hotels in their top-10 holdings, including Aruna Karunathilake’s Fidelity UK Aggressive and TM Darwin Multi Asset, run by David Jane, former head of equities at M&G. 

Moreover, only two funds – HSBC Common Fund for Growth and HSBC UK Focus – hold Whitbread in their top-10.

At the other end of the spectrum, Hunter says wider economic forces have had more of an impact.

While cyclical stocks started the year strongly as positive US data led to a feeling of optimism among investors, negative headlines regarding Europe and China led to a significant correction in April and May. 

"The performance of mining stocks is allied to strong growth in emerging markets but warnings of a hard landing in China have hammered share prices," he explained. 

"It is also symptomatic of the risk-on/risk-off trade we’ve seen this year; as investors worry about macro risks they sell out of their risk exposure." 

Ten worst-performing FTSE stocks in 2012

Stock	Returns (%)
Eurasian Natural Resources	-37.4
Evraz	-32.9
Weir Group	-28
Kazakhmys	-26.8
Tesco	-20.8
Xstrata	-18.8
Morrison Supermarkets	-16
Vedanta Resources	-15.3
Anglo American	-15.1
ARM Holdings	-13.6

Source: FE Analytics

Thirteen of the names languishing in the bottom third of the league table operate in the natural resources sector. Eurasian Natural Resources, Xstrata and Vedanta Resources are among the worst performers. 

Xstrata has been the focus of a high-profile merger with commodities giant Glencore but recent disputes among shareholders have put the deal on the brink of collapse. 

FE data shows that 37 funds in the IMA universe list Xstrata in their top-10. Aside from specialist commodities portfolios such as JPM Natural Resources and First State Global Resources, many higher-risk UK equity funds hold the firm.
 
For example, the £683m Standard Life Investments UK Equity High Income fund has a 3.3 per cent weighting, while the £268m Aviva UK Special Situations fund – managed by FE Alpha Manager Andy Brough – has 3.7 per cent. 

Elsewhere Tesco had a poor start to the year, losing 21 per cent following a profits warning back in January. This prompted star manager Neil Woodford to sell up his position in the company. Warren Buffett, meanwhile, remains fully invested. 

Turning to mid cap stocks, investor favourites Dixons, Ocado and William Hill are among the FTSE 250's top-10 for 2012, while Homeserve, MAN Group and DS Smith are among the worst performers.