With the FTSE 100 up 7% so far in 2017, Graeme Evans reveals the most-popular blue chips on the interactive investor platform this year.
For all the talk about record highs for the FTSE 100 Index, many investors will be left with the feeling that the past year really hasn’t been that special.
The blue-chip index traded in a narrow and deeply uninspiring range for much of the year, while some of our most popular companies have disappointed.
Take the share price performances of the two most-bought stocks on the interactive investor platform in 2017: Lloyds Banking Group (LLOY) and BT (BT.A). Both seem to have managed to deliver hope and disappointment in equal measure.
Lloyds is a regular at the top of our most-bought table, particularly now the pain of restructuring is out the way and there should be room to grow dividends.
But that’s not been reflected in the share price performance this year, with Lloyds in a range of between 62p and 72p, and finishing the year close to 67p. Bear in mind, the stock had been at 87p in the middle of 2015.
It’s not as if our readers have been guilty of plumping for a stock out of sentiment towards an old favourite. The positive stance is mirrored in the City where a welter of ‘buy’ recommendations have backed the Lloyds story.
Among the supporters, Investec Securities argues that Lloyds’ record of strong capital generation means there should be ample opportunity to meet the broker’s above-consensus dividend forecast of 4.5p a share.
The need to hold even more capital should also be receding now that the Prudential Regulatory Authority has disclosed its Pillar 2A requirements.
But it’s likely we will have to wait until February’s annual results to be sure exactly how much capital Lloyds thinks it will need in order to maintain its pledge for a “progressive and sustainable” ordinary dividend.
Chief executive António Horta-Osório’s strategy update for the period 2018-2020 may well be the trigger for special dividends or share buy-backs.
In the meantime, the impact of rising interest rates on impairment levels, and the ever-present danger of yet more money being needed to cover PPI claims, could act as a potential drag on the stock.
Ticker Company 1 LLOY Lloyds Banking Group 2 BT.A BT 3 GSK Glaxosmithkline 4 BP. BP 5 NG.
National Grid 6 VOD Vodafone 7 BARC Barclays
8 RDSB Royal Dutch Shell 9 TSCO
Tesco 10 CNA Centrica
BT’s position as our second most-bought stock is significant because sentiment towards the troubled telecoms company has been incredibly bearish all year.
Shares, which topped £5 at the start of 2016, slumped to below 250p in November before signs emerged in recent weeks that the dismal run may be over.
UBS certainly thinks there’s a bargain to be had after it upgraded its rating on the shares from ‘neutral’ to ‘buy’ and lifted its price target by 20p to 330p, largely driven by hopes of a lower than-expected pension deficit.
A forward price/earnings (PE) ratio of less than 10 and forward dividend yield of 5.8% is certainly worth investigating.
A defining moment for BT will come early in 2018 when it faces up to Sky (SKY) and tech rivals including Amazon (AMZN) in the next auction of Premier League football rights. There’s also the pressing issue of what to do with Global Services, which has been a major drag on the company’s performance.
Investors will be hoping that City grandee Jan du Plessis, who has replaced former CBI president Sir Mike Rake as chairman, will be able to oversee a change in fortunes.
A similar sentiment prevails towards British Gas owner Centrica (CNA), with many investors clearly still prepared to back under-fire chief executive Iain Conn to revive the group. It’s a risky bet though, given that November’s profits warning prompted fears that the dividend will not survive further disappointments.
From 400p in 2013, the blue-chip stock is now languishing at 138p, having slumped as much as 18% last month after announcing the dramatic loss of 823,000 UK home customers in just four months.
Among our other most-bought FTSE 100 shares, investors appear to have spent wisely with BP (BP.) and Royal Dutch Shell (RDSB). Having endured a difficult two or three years adjusting to lower oil prices, there are signs that the oil majors are now in a sweet spot where they will be able to fund increased investment as well as improved shareholder returns.
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.