Interactive Investor

Best and worst shares in January 2018

2nd February 2018 12:19

by Graeme Evans from interactive investor

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If January is anything to go by, 2018 will be quite a year. We've already seen the demise of Carillion, the share price collapse of Capita, and the start of a hostile takeover battle over FTSE 100-listed GKN.

Amongst these major events, there's been a high number of revisions to earnings guidance, as well as volatility across stocks and sectors.

But who would have thought the supposedly safe bet that is funeral care firm Dignity would be the biggest faller in the FTSE All-Share so far in 2018?

Its shares slumped 55% in January after warning of substantially lower profits in 2018, which it blamed on having to slash the price of its "simple" funerals by an average of 25% in order to address competition.

Capita is not far behind Dignity after its latest profits warning fuelled worries that it is on the same slippery outsourcing slope as Carillion.

Shares fell 54% in January to 158.6p the lowest level since 2003 -as it suspended its dividend and announced plans for a £700 million rights issue as part of a "kitchen sink" job by new boss Jonathan Lewis. It's more pain for fund manager Neil Woodford, whose 2017 losses included Provident Financial.

Mixed fortunes for retail sector

The other FTSE All-Share stock to lose over half its value in January was Carpetright, which revealed a significant deterioration of UK trading during the important post-Christmas trading period.

The latest downgrade from the retailer meant shares tumbled 52% to 85.5p, which leaves chief executive Wilf Walsh nursing some heavy losses after buying 31,250 shares in the business at 160p only two weeks prior to the update.

Other retailers caught on the wrong side of analysts' expectations after Christmas were Mothercare - down 31% in January - Card Factory - off 35% - and Moss Bros, which declined 28%.

Next was a shining light in the retail sector as investors reacted with relief to its Christmas trading update by powering the shares 13% higher in January.

In one of the first big corporate events of 2018, Next chief executive Lord Wolfson eased market jitters by predicting that some of the headwinds facing his company should ease in 2018.

There was also a much-needed boost for electricals retailer AO World, which has consistently disappointed since joining the stockmarket in early 2014.

It started the month near to all-time lows and at a 70% discount to its peers, driven by the costs of expansion into new markets. But the shares have rallied on the back of a reassuring update, while AO also featured as one of Peel Hunt's Value stocks of 2018. Shares rose 28% to 140p in January.

Value stocks to own in 2018

As one of the most shorted stocks on the UK market, online supermarket Ocado gave investors food for thought with its blistering performance in January. The shares have now more than doubled since November's warehouse and licensing agreement with France's Groupe Casino.

This deal was followed last month by a second similar arrangement with Canada's Sobeys as shares rose 27% to 518p in January.

Blue chip winners and losers

In the FTSE 100, GKN achieved the biggest rise overall after the engineering business was the subject of a £7.4 billion bid from turnaround group Melrose. Shares rose 32% to 423p in January.

At the bottom of the FTSE 100 pile was Micro Focus International after disappointing trading by the software assets it acquired from Hewlett-Packard Enterprise in a recent major deal.

Shares fell 15% in January as the company warned that revenues will be between 2% and 4% lower in the year to October 31. Drugs firm Shire was also down 15% in the top flight after admitting that it wouldn't meet its target for $20 billion (£14 billion) in annual revenues in 2020.

Other big fallers in the FTSE 100 during January included Severn Trent and United Utilities as investors worried about the prospect of dividend cuts resulting from next year's pricing review by regulator Ofwat. The pair were down 10% and 11% respectively.

Housebuilders also drifted lower on fears that the boom in the sector may be coming to an end. There was also speculation that the government will look to rescind planning permission if land is not used. Barratt Developments (BDEV) fell 10% and Persimmon (PSN) dropped 9%.

AIM All-Share

On AIM, the table of fallers was littered with anonymous miners, oil companies and tiny tech companies - true penny shares. The opportunities offered by the risers is much more interesting.

Admittedly, only two of AIM's top 10 gainers in January were capitalised at over £50 million, but four share prices still doubled in just one month - i3 Energy, Borders & Southern, N4 Pharma and Lombard Risk management.

Biggest of the 10 - graphene hopeful Versarien - rocketed 77%, taking its market cap to £160 million.

Last month, it announced a collaboration with global clothes company to work on incorporating graphene into fabrics and high-performance sportswear. It will also build a graphene manufacturing centre in China. Watch this space.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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