Much of the action seems to be in the small cap part of the market and the racy sectors such as oil and gas, which can offer sudden, sharp returns that investors dream can make them rich.
Many of the stocks that get the most attention from retail investors are just that sort of share, with Gulf Keystone Petroleum being a recent example.
The small cap production company has the rights to large gas reserves in Iraqi Kurdistan, which has ignited the fires of greed in many a part-time punter. The stock is a favourite wherever private investors gather, with positive and negative opinions rife.
The fate of the stock over the past 12 months illustrates perfectly the nature of investing in this sort of business.
Performance of stock over 1yr
Source: FE Analytics
Data from FE Analytics shows it has been a bumpy ride, with the maximum drawdown – the most investors could have lost if they bought and sold at the worst possible moments – 39.29 per cent, way ahead of the 8.37 per cent of the FTSE All Share.
However, it was also much more volatile on the upside, with a maximum gain of 26.34 per cent, more than three times that of the index.
Although this year it has ended up 9 per cent down, should it get production online it could well make investors a fortune. This sort of stock isn’t for the majority of investors, however.
Anyone who cannot risk losing everything they put in or who wants something less volatile would be better off looking at a different type of stock.
Over the coming weeks, FE Trustnet will be looking at some of the biggest names on the UK market and analysing where they stand as an investment proposition.
Tesco is a share to have come under pressure recently, with the company reporting profits down 23.5 per cent in the 26 weeks to the end of August. The share has lagged the wider market since then, although not to a great degree.
Performance of stock vs index since 24 Aug
Source: FE Analytics
But is this the sign of things starting to go wrong for the retailer? Another potential problem for the company emerged abroad as it gave up on plans to expand its brand in China.
Instead, the company will tie up with China Resource Enterprise, which runs the Vanguard brand in that country.
This was seen as a defeat, coming hot on the heels of the supermarket withdrawing from the US and selling off its Fresh & Easy franchise.
The October results statement that reported a sharp fall in profits was largely influenced by poor results in overseas markets, with the UK the only region to report growth, suggesting that it is the internationalisation of the business that is causing problems.
However, a number of highly successful investors see this as short-term noise. One investor to value Tesco highly is the most famous one in the world: Warren Buffett.
Buffett is famous for investing in top-quality franchises that seem to have fallen on hard times and making a lot of money from them – he did exactly the same with Coca-Cola when it seemed on the wane in the 1980s.
Buffett has owned Tesco since 2006 and has steadily increased his holding to 5 per cent of the company.
In 2012 he bought more shares after it issued a profit warning and its price fell by almost 20 per cent.
Performance of stock vs index over 3yrs
Source: FE Analytics
One of the key reasons is its dominant position in the UK, which Buffett believes makes it the equivalent to WalMart in the US.
Another manager to stick by the stock and relish its recent cheapness is Charles Heenan, who runs the Kennox Strategic Value fund with Geoff Legg.
They also bought into the stock after its 2012 profits warning, and say they are unconcerned by the recent wobble.
It is a good defensive stock to own in this sort of environment, Heenan explains.
"It should hold up better in a poor market and it’s less exposed to the UK economy than fashion retailers, for example," he said.
The manager thinks that Tesco’s attempt at international expansion is a perfectly reasonable strategy to follow.
Taking a long-term view, it makes sense to aim for an analogous position to its number one market share in the UK and then withdraw if it doesn’t work out, he says.
"If you are number one or two in the market, you capture vast benefits and they have achieved that in Korea and Thailand, and they have also done very well in eastern Europe," he said.
"If you get number one or two that’s great, but if you don’t, you come out," he added.
The manager also approves of the tie-up with CRE, which he sees as a decent result.
"I think it makes a huge amount of sense to tie up with CRE. Don’t try and be a hero – admit your mistakes and go for the lower return but lower risk option."
Much more worrying for these investors would be signs that Tesco is losing market share in the UK.
If you were to read the press you would be under the impression this is already happening – but the press, we must admit, can often take a short-term view.
Compounding Tesco’s woes this month were reports that its market share had slipped from 30.9 per cent to 30.2 per cent. This may not seem very much, but ominously the only major brand to increase market share was the number two – Sainsbury’s.
The threat seems less realistic when the fact that Sainsbury’s still only has a 16.6 per cent share of the market is taken into account, having grabbed a further 0.2 per cent in the 12 weeks to 15 September.
Tesco has reaffirmed its commitment to protecting its lead in the UK, which Heenan says is the most important thing.
He adds that the amount of cash the business generates gives it lots of leeway to resolve its issues.
Cash-flow from operations actually grew in the last half-year period, showing that the company’s cash-generating powers remain considerable.
"It generates approximately $1bn a quarter; having that amount of money makes it a lot easier to sort out your problems," he said.
Heenan is confident that the company will be able to protect its position in the UK, and he thinks it is well placed to cope with the major secular changes in the economy. The supermarket is ideally positioned to lead the charge online, he says.
"Don’t forget for us the first thought is capital preservation and we think Tesco is reasonably defensive and they are spending money defending the UK too."
"My biggest concern is that everybody thinks they need to expand [shop numbers]," he said. "Online is changing that as well."
"One of the other things we like is that it is the biggest online retailer in the space by a country mile. It’s part of the reason straight expansion is not something they should be doing."
"The banking business is also quite interesting. You can see Tesco being a one-stop shop for a lot of people."
Heenan says that on a P/E ratio of around 10, there is still plenty of value to be found in the company.
Tesco has had a number of problems over the past year, but shares have held up relatively well, suggesting that the bad headlines may not be feeding through to investor confidence.
It is the sort of stock that is unlikely to double and allow investors to retire, but for anyone with a long-term horizon there are reasons to believe it could be a shrewd choice.
It is a boring choice, to be sure, but it has an extremely strong position in its most important market and a decent platform to expand its online business and rival the unpopular high street banks.
It is probably safe to assume that Warren Buffett has had a pretty good look at the business too, and he likes what he saw.
If there is a large cap stock you would like us to look at in the coming weeks, please leave a comment below or email us at editorial@trustnet.com. We will not be able to cover them all, but we will certainly consider suggestions.
