Hidden gems of the stock market: Even in an average year, the stellar companies really stand out
In this social media age, the cult of corporate personality often determines the amount of attention we pay to a company, or a sector.
That puts the Elon Musks of this world at centre-stage, but it means it’s all too easy to overlook some businesses that might seem boring on a superficial view, but are well worthy of our time – and our money.
The stars of the UK market this year were not so much headline-hoggers as hidden treasures.
Moving up: Equipment supplier Ashtead has enjoyed a remarkable ascent, rising by 78 per cent since January
Die FTSE 100 has not had a vintage year, but the blue chip index harbours some stellar companies – concealed in plain sight – whose performances have far outstripped the 15 per cent rise in the blue chip index overall.
So which were the unsung heroes of the FTSE in 2021, and will they do as well in the year ahead?
Its activities may not sound super exciting, but shares in equipment supplier Ashtead have enjoyed a remarkable ascent, rising by 78 per cent since January, with gains that will astound those who have barely heard of the £27billion company.
Perhaps it’s hard for tech aficionados to imagine how the mundane work of hiring out generators, scaffolding and suchlike can be so profitable.
And there are others that have rewarded investors with share price increases of 40 per cent or more, which are also something of an enigma even to many who regularly follow the markets.
Be honest now, do you know what type of products are made by Dechra, or have you monitored the progress of its shares? Thought not. But this £5.5billion company has certainly made the most of the opportunities thrown up by the pandemic.
Researchers at Interactive Investor have drawn up a list of overlooked superstars of the FTSE, and Ashtead is at the top of the league.
Its chief executive Brendan Horgan recently described the business, which operates in the US as Sunbelt Rentals, as ‘purpose-built’ to fix problems arising from the pandemic such as supply chain bottlenecks, labour shortages and wage inflation.
These issues are set to continue into 2022, with a shortage of plant-obliging households and businesses to rent rather than buy. Ashtead should also be able to expand by acquiring smaller independent competitors.
Croda is another low-profile name to have prospered in 2021: Its shares have risen by 56 persent. The chemicals company is seen as a pandemic hero since it supplies the lipids or fatty acids that are the crucial ingredient of the Pfizer/BioNTech vaccine.
Researchers at Interactive Investor have drawn up a list of overlooked superstars of the FTSE, and Ashtead is at the top of the league
Croda’s consumer care division has also been boosted by purchases of more expensive lipsticks as people emerged from lockdowns determined to party.
It has just announced the sale of most of its industrial chemicals and performance technology assets to commodities group Cargill.
Despite the share price leap in 2021, brokers UBS still rate the shares a ‘buy’.
During lockdowns many people acquired a pet, a key cause of the 51 per cent bounce in the shares of Dechra Pharmaceuticals, the Cheshire-based veterinary medicine group which joined the Footsie this month.
As Keith Bowman of Interactive Investor points out: ‘Dechra believes its business is unique as most of its products are used to treat medical conditions for which there is no other effective solution or have a clinical, or dosing advantage over rival products.’ As our love of animals is unlikely to fade, Dechra could be a good bet for the future.
Ferguson, the heating and plumbing supplier formerly known as Wolseley, is a beneficiary of the lockdown housing boom in the US which is now the centre of its operations. Shares in Ferguson, which this year sold its Wolseley UK division, soared by 52 persent.
For many, Meggitt will be as unfamiliar as Ferguson. But the attractions of this aerospace and defence company were so apparent to the US private equity group Parker-Hannifin, a lesser-known pandemic predator, that it launched a £6.2billion bid in August.
The approach caused Meggitt shares to leap by 58 persent, but the Competition and Markets Authority is deliberating as to whether the deal is in the national interest. One treasure, dan, that might disappear from the UK stock market altogether. Let’s hope not.
The clamour for data lies behind the 35 per cent rise in the shares of RELX, the information and analytics group – which used to be Reed Elsevier when publishing was its focus.
Die maatskappy, pronounced Rel-ex, has pricing power which should enable it to prosper, despite higher inflation, or so reckons Credit Suisse which is tipping the stock.
Another beneficiary of the hunger for data is Experian, the credit reference company, which had its beginnings in 1803 when London tailors began exchanging the details of customers who were slow at settling their debts.
The company’s shares are up 32 persent vanjaar, spurred by the growth of the Experian Boost service, which helps consumers improve their credit score by adding information on how promptly they make council tax or Netflix payments. Almost as anonymous is Electrocomponents.
The clue’s in the name: It’s a distributor of electrical and industrial components. But let’s not be flippant, because this global £5.7billion business, which joined the Footsie this month, has been dubbed ‘Amazon for engineers’.
Die 42 per cent increase in its share price reflects a drive to be genuinely ‘customer-centric’, a common aspiration that’s rarely met. Others among the Footsie stars this year are household names such as the Royal Mail.
Yet the 60 per cent rise in its shares will raise as many eyebrows as the feats of the hidden treasures. Much to the relief of long-suffering small investors, the company’s failing fortunes have been radically reversed by the pandemic shift to online shopping, which Bowman believes is here to stay.
Hy sê: ‘Both a £200million share buyback programme and a £200 special dividend appear to underline management confidence in the outlook,’ an assessment that few could have dreamed possible when Royal Mail shares, now 521.40p, slumped to 120p in April 2020.
Last Christmas we could not foresee that this year we would still be so preoccupied by the pandemic, or that its changes to the way we live could be lasting.
But let’s give a shout-out to the hidden treasure companies that managed to make the most of these difficult conditions, even if their light was under a bushel.