Since the start of the year, some of the best-performing FTSE 100 stocks have been in the utilities space, where regulatory pressure has left many investment managers wary to invest.
United Utilities Group, which is the largest listed water company in the UK, has so far been one of the leaders in the blue-chip index, picking up 31.69 per cent while the FTSE 100 has made a mere 1.9 per cent, according to FE Analytics.
Year-to-date performance of stock vs index
Source: FE Analytics
Both Scottish and Southern Energy (SSE) and Severn Trent are also within the top-15 best-performing FTSE 100 stocks in 2014.
Other stocks that have performed well include AstraZenca, which saw its share price shoot up on the news US pharmaceutical giant was sniffing around to buy up the UK firm. Though the deal has since come off the table, Astra has held on to the majority of its gains.
European retail property manager Hammerson, engineering firm Weir Group and the previously out-of-favour Mexico-based precious metals miner Fresnillo have all seen strong gains since the start of the year.
Source: FE Analytics
Shire and Randgold Resources have been the two standout performers however, returning 59.14 and 32.43 per cent, respectively. Randgold has recovered from a disastrous few years, though it's still losing money over one, two and three year periods. Stellar earnings upgrades have sent Shire shares into orbit this year, with returns of more than 20 per cent in the past month alone.
Shire is held in the top-10 by more than 50 funds including Nigel Thomas' AXA Framlington UK Select Opps fund. Randgold is less popular, held generally by only gold-focused managers.
Only a few funds have benefited from United Utilities’ strong start to the year – eight funds in the IMA universe hold the stock in their top-10, and most are specialist funds like the Pictet Water and F&C Stewardship Income.
However, Julian Chillingworth does hold the stock in his four-crown rated Rathbone Blue Chip Income & Growth fund.
AstraZeneca, on the other hand, is a favourite among fund managers, with nearly 200 funds in the entire IMA universe holding the pharma giant in their top-10. Neil Woodford’s SJP High Income fund and Mark Barnett’s Invesco Perpetual High Income and Income portfolios are among those that have befitted most. Both are top-quartile performers in their sectors year-to-date.
Although the small and mid-cap rally ran out of steam earlier this year, there are a number of companies that have shot the lights out in the FTSE 250, most notably Petra Diamonds Ltd, which is up a stellar 61.4 per cent since the start of the year.
Only one fund manager holds the mid-cap stock in his top-10 – Neil Gregson in his JPM Natural Resources fund.
One mid-cap stock that could be seeing a shift in fortunes is the battered and bruised investment management business Man Group. The stock has been bleeding cash for several years – in 2011 alone it lost an eye-watering 60.4 per cent – but Man Group is up 27.4 per cent year-to-date, making it the sixth best-performing stock in the mid-cap index.
Very few fund managers have been willing to take a punt on the struggling company. Only four funds in the IMA universe are backing it in their top-10: Majedie UK Income, Manek Growth, Old Mutual European Best Ideas and Premier Optimum Income.
It’s not all been good news for markets, however, as seen by some of the FTSE 100 and FTSE 250 in deep red this year.
Severe profits warnings have seen the likes of Rightmove lose more than 20 per cent this year, with the FTSE AIM-listed ASOS – which is big enough to sit in the mid-cap index – down more than 50 per cent.
Harry Nimmo’s Standard Life UK Smaller Companies fund held both as top-10 holdings as recently as April, but sold completely out of ASOS in recent weeks.
Source: FE Analytics
The worst offender in the FTSE 100 has been discount supermarket chain Morrisons, which has seen its share price slide 26.2 per cent since the start of the year.
It isn’t the only supermarket to fare badly. Tesco also been hit hard by the price war going on in the sector, seeing its share price fall 11.88 per cent since the start of the year.
Year-to-date performance of stocks vs index
Source: FE Analytics
No funds are backing Morrisons in their top holdings but Tesco is a popular stock, particularly among value-based UK equity managers. Star contrarian investor Alastair Mundy recently bought into Tesco and Morrisons in his Investec UK Special Situations fund because he thought the competition threat from discount retailers had been exaggerated.
The manager holds Tesco in his top-10 while Morrisons sits further down the portfolio.
Some of the UK’s stalwart income payers have also taken a knock. Rolls Royce and Vodafone are both languishing in the bottom 10 stocks in the index, down 15.88 per cent and 19.31 per cent, respectively.
Rolls Royce’s share price was slammed on the back of its first profit warning in a decade, which the firm issued in February this year. The stock plummeted nearly 20 per cent on the back of the news and while it has regained some ground since the announcement, the share price has remained relatively flat since.
Vodafone’s share price has also been in steady decline since the end of February. Last year, the company announced it would part with its stake in US telecoms company Verizon. The share price shot up on the back of this news and the company even issued a special dividend with the billions of pounds in cash it had on its hands.
However, the sale of the US firm cut the UK telecoms company’s value in half and the share price has been sliding since.
For investors who believe the future prospects are bright for either of these long-standing companies, now could be a good time to buy because both dividend yielding companies are cheaper than they’ve been in recent history.
Among the 27 funds that include Rolls Royce as a top-10 holding are Aberdeen Multi Asset and Invesco Perpetual Income, while Schroder UK Alpha Income and Newton Higher Income are two of 176 funds going big on Vodafone.
