Despite a punishing year for stock markets, close to 70 stocks on the FTSE Small Cap index made a positive return for their investors in 2018.
Across the year, the FTSE Small Cap was down by 9.52 per cent, in total return terms, as investors continue to shy away from the UK amid Brexit uncertainty. In addition, headwinds such as the US-China trade tensions, the Fed’s monetary tightening and slowing growth held back markets.
While UK small-caps underperformed the FTSE 100’s 8.73 per cent fall, they did beat the 13.25 per cent slide in the FTSE 250.
Over 2018, 78 of the FTSE Small Cap’s 282 constituents made a positive total return, with 24 of these being in the double-digits. That said, there were some hefty losses as well.
Below, FE Trustnet takes a closer look at the winning and losing FTSE Small Cap stocks of the past 12 months.
Performance of stock over 2018
Source: FE Analytics
The year’s highest total return came from technology company BATM Advanced Communications, which was up 80.19 per cent.
BATM Advanced Communications was founded in 1992 and is headquartered in Israel. It has two main divisions: one focused on networking and cybersecurity, the other on bio-medical and bio-waste treatment solutions.
The company’s shares jumped in June after it announced that wholly owned subsidiary Telco Systems had entered into a joint development agreement with a major semiconductor company to develop and market infrastructure solutions for network function virtualisation . That leading company was later revealed to be Arm Holdings.
The stock is the largest holding of the Legal & General UK Alpha fund and can be found in the top 10 positions of Marlborough Nano-Cap Growth.
In second place with a 59.82 per cent total return is bio-pharmaceutical company Oxford Biomedica. The company develops gene and cell therapy technologies, with a focus on areas such as oncology, ophthalmology and central nervous system disorders.
Its shares rose in June on the back of an exclusive worldwide license agreement for its OXB-102 treatment for Parkinson’s disease, in a deal with Axovant Sciences worth $842.5m. At the time, chief executive John Dawson said: “We are delighted to sign this significant agreement which … further demonstrates Oxford BioMedica’s ability to build multiple partnerships with leaders in their respective therapeutic fields.
“This agreement with Axovant also successfully demonstrates Oxford BioMedica’s pre-stated strategy to externalise product development beyond the end of the pre-clinical phase.”
The stock is a top 10 holding of M&G Recovery and Fidelity UK Opportunities.
Source: FE Analytics
The third-highest return on the FTSE Small Cap last year was Gem Diamonds, which owns the Letšeng Diamond mine in Lesotho and the Ghaghoo mine in Botswana. It was up 56.34 per cent in both price and total return terms in 2018.
The firm says its Letšeng mine is “renowned for its regular production of large, top colour, exceptional white diamonds, making it the highest average dollar per carat kimberlite diamond mine in the world”.
Its stock rose in March after it recovered a 169-carat diamond, which was top white colour Type IIa, from the Letšeng mine. It also reported a rise on full-year revenues later in the month, as well as the sale of ‘The Lesotho Legend’ - which at 910 carats is the fifth largest gem quality diamond ever recovered – for $40m.
Zotefoams, which manufactures a range of closed-cell cross-linked polyolefin foams for use in sports, construction, marine, automation, medical equipment and aerospace, is in fourth place with its 56.17 per cent total return.
The firm, which is headquartered in Croydon and has a US subsidiary in Kentucky, is owned by the likes of AXA Framlington UK Smaller Companies, BlackRock UK Smaller Companies and LF Miton UK Multi Cap Income.
Rounding out the top five is the Lindsell Train investment trust, which was up by 46.60 per cent across the course of 2018. It is run by FE Alpha Manager Nick Train and is concentrated portfolio of global equities, along with a significant holding in Lindsell Train Limited – the successful asset manager founded by Train and Michael Lindsell.
Source: FE Analytics
As the table above shows, the worst return on the FTSE Small Cap index last year came from Carpetright – which was down 88.56 per cent.
The floor coverings company crashed in January following a warning that full-year profits would be much less than expected. Analysts had previously thought profits would come in at around £14m but the firm revised this to between £2m and £6m.
Carpetright chief executive Wilf Walsh said at the time: “We have seen a significant deterioration in UK trading during the important post-Christmas trading period. While average transaction values were up year-on-year, the number of customer transactions since Christmas were sharply down.”
Estate agent Countrywide slumped after a fourth profit warning in just eight months, the need for a capital raise and investor action that pushed a board member who drew up a £20m executive pay plan to step down. Department store Debenhams struggled because of the weak UK high street and a large debt pile.