The invisible hand of the facilities management (FM) industry operates in almost every large commercial building. Someone is maintaining the chillers and the fire-suppression system. Someone is cleaning the floors. Someone, in theory, knows whether the heating, ventilation and air-conditioning (HVAC) unit on the fourth floor is three months from failure. This industry, sprawling, unglamorous and rarely covered by analysts, generates north of $4 trillion in annual global revenue. It is also in the early stages of a bifurcation that will create some genuinely interesting investment opportunities and destroy a remarkable amount of value for those who pick the wrong horse.

The core problem with facilities management is that it has spent decades solving the wrong problem. It has been focused on fixing things rather than understanding why things break in the first place. It has been reactive when its customers need it to be predictive. It has been operational when the most sophisticated clients are desperate for something more strategic. And it has been unable to provide evidence of the value it affords. Every contract renewal thus defaults to a conversation about cost that facilities management companies are badly placed to win.

Technology is now changing this, but not in the way most industry observers have assumed. The narrative for many years has been that some form of unified digital platform, a so-called single pane of glass, would allow facilities managers to own the data and therefore control the strategic conversation with their clients. That narrative is broadly correct. What it has missed is who actually ends up controlling that glass.

The problem with facilities management companies

The smart money is on the original equipment manufacturers (OEMs). Siemens, Schneider Electric, Johnson Controls and Trane Technologies have all made aggressive acquisitions of integrated workplace-management software businesses in the last three years. They control the mechanical and electrical systems that generate the core telemetry. They are now buying the platforms that interpret that data.

CBRE and JLL, two giant US commercial property services and investment groups, have responded with their own investments in technology, and CBRE in particular has built something genuinely differentiated. Its technology stack, running from raw asset data through AI-driven performance optimisation to a generative AI interface for facility managers, is meaningfully ahead of most traditional facilities management rivals.

More importantly, CBRE has made a strategic choice that I think is correct and underappreciated: it self-delivers the engineering and maintenance work where risk and complexity are high and it subcontracts almost everything else. This keeps the business focused on what it does best, avoids the diseconomies of running enormous low-margin cleaning and catering workforces, and keeps the conversation with customers at the level where CBRE's technology and insight capabilities actually add value.

The integrated model that FM firms ISS, Coor, Mitie and ABM Industries have pursued, employing vast workforces across subsectors from cleaning and engineering to food service, has struggled with low margins, volatile earnings and weak cash generation.

It is not that these companies are badly run. It is that the model is structurally disadvantaged. Every dollar of capital reinvested in innovation or process improvement flows through to a smaller share of the overall business when that business is simultaneously managing electricians, cleaners, security guards and caterers. The benefits of scale are harder to capture. Best practice is harder to standardise. The most talented engineers would often rather work for a pure-play technical services company than be one service line among eight.

Compass Group found the right path

There are exceptions and they are instructive. Compass Group has built one of the most impressive records in global services by staying almost entirely focused on food. Its management and performance framework is a masterclass in what happens when a large, decentralised services firm imposes a common operating language and a small number of clearly defined drivers of value across an entire organisation.

The framework ties every decision to one of five levers determining profit or loss – from client retention and consumer participation through to labour scheduling and overhead control. It sounds almost boring in its simplicity. It has produced two decades of best-in-class margin delivery at scale.

My preferred name among facilities management stocks is Bravida (Stockholm: BRAV), the technical services group that installs and maintains the electrical, HVAC and plumbing systems in buildings across Sweden, Denmark, Norway and Finland. It does not try to do everything.

Bravida focuses almost entirely on facilities management engineering delivered through a network of 330 branches providing the local density and proximity to customers that makes the economics work. When you build genuine scale in a single technical discipline, you can standardise ways of working, invest properly in training and certification, attract the best engineers, and compound efficiency gains year after year.

Bravida has been through a difficult patch, hit by a Swedish construction downturn, a governance failure in one branch that has since been closed and prosecuted, and some bad debts from a large customer. The share price has derated significantly. I think that creates an opportunity. The underlying business model is sound, the structural drivers for technical building services are strongly positive, and the company's internal focus on operational excellence is exactly the kind of self-improvement culture that separates durable compounders from cyclical operators.

The privately owned CFS, or Churches Fire & Security, is another business worth watching. It operates in the UK fire safety and electronic-security market, an arena driven by tightening regulation, historic underinvestment and alarming fragmentation that sees roughly 2,000 small operators competing with essentially no scale advantages. CFS has now absorbed over 70 businesses, each integrated fully within three to six months. Revenue has jumped to £100 million at attractive margins. The model is replicable, the regulatory tailwinds are real and the market is large enough to sustain further consolidation.

Depth beats breadth in the facilities management industry

Focused, scalable business models with genuine density economics outperform diversified ones over time, by a wide margin. The temptation to add services and geographies is understandable in an industry where large contracts look attractive from the outside. But every incremental service line is also an incremental distraction. Peter Thiel has noted that you cannot run dozens of start-ups simultaneously and hope one works out. The same logic applies to a low-margin services business with finite capital and management bandwidth. Depth beats breadth, almost every time.

The FM industry is also at a genuine technology inflection. Advances in building sensors, AI-driven predictive maintenance and integrated data platforms are removing the ability of mediocre operators to hide. Buildings that were opaque are becoming transparent. Clients that once relied on SLA compliance reports are now demanding energy dashboards, asset-lifecycle forecasts and sustainability documentation.

Operators with weak processes and inconsistent data capture will be exposed. Operators with strong processes, standardised ways of working and an ability to translate data into value for customers will find themselves able to charge for something other than just labour. The buildings around us are getting smarter. The companies that service them need to be smarter too. The ones that are will be interesting to own.

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The FTSE 100 looks set to generate a record level of dividends this year, with analysts expecting the index’s constituents to pay out a combined £88.8 billion.

Most of the top stocks in London’s flagship index are large, well-established companies in sectors like healthcare, financials, oil and gas and consumer staples. Companies like these are in prime position to pay out healthy dividends to income-focused investors.

The amount that analysts forecast the FTSE 100 to pay out in dividends this year has risen over the past three months, from £88.0 billion in March, despite the impact of the conflict in Iran.

“As a result, consensus analysts’ estimates suggest that 2018’s all-time high FTSE 100 dividend payment of £85.2 billion will finally be exceeded in each of this year and next,” said Russ Mould, investment director at investment platform AJ Bell.

“As a result, consensus analysts’ estimates suggest that 2018’s all-time high FTSE 100 dividend payment of £85.2 billion will finally be exceeded in each of this year and next.”

“Share buybacks could yet supplement this total,” Mould continued. “The FTSE 100’s members have already declared cash returns worth £36 billion via this mechanism for 2026. Add that to the forecast dividend payments and the total cash return from the FTSE 100 is currently expected to be £124.8 billion in 2026, or 4.7% of the FTSE 100’s total £2.7 trillion stock market valuation.”

Mould pointed out that this aggregate dividend yield beats both inflation and the Bank of England’s base rate, and is only slightly lower than the yield on the benchmark 10-year gilt (which is around 4.8%).

Top dividend stocks in the FTSE 100

Ten companies collectively (10% of the index’s constituents) account for more than half the FTSE 100’s expected dividend payouts this year, with a combined expected dividend payout of £46.8 billion.

They are:

^{Source: Company accounts, Marketscreener, consensus analysts’ forecasts via AJ Bell. Ordinary dividends only. Data as of 12 June 2026.}

While the figures above show the total amount these companies are expected to pay in dividends this year, it is worth considering the dividend yield – which measures dividends as a percentage of market capitalisation and, therefore, shows what your income from a stock would be based on the price you pay for its shares.

Those ten companies offer the following dividend yields, as of 29 June:

^{Source: LSEG}

According to AJ Bell, the top 10 FTSE 100 stocks based on their forward dividend yields (expected dividends over the next year as a percentage of their share price) are:

^{Source: Company accounts, Marketscreener, consensus analysts’ forecasts, LSEG Refinitiv data via AJ Bell. Based on ordinary dividends only. Data as of 12 June 2026.}

FTSE 100 dividend payouts should be resilient despite the disruption from the conflict in Iran and the resulting closure of the Strait of Hormuz.

“Forecasts for company profits and dividends [have not] suffered thanks to the war in the Middle East, despite lingering concerns over the risk of long-term supply disruption of not just oil, but liquefied natural gas, sulphur, and helium,” said Mould. “Company earnings reports have been strong as upside surprises have comfortably outnumbered profit warnings on both sides of the Atlantic.”

Income-focused investors who favour investment trusts can also look for dividend heroes – trusts with a track record of raising annual dividends consistently for at least 20 years.

Legal & General Group (LSE: LGEN) is one of the oldest companies in the UK. It's also one of the few remaining that formed part of the FTSE 100 at the time of its inception. The group is known among investors as a slow-and-steady beast that pays a consistent, relatively high dividend yield, but hardly does anything to get the pulse racing. That is starting to change as Legal & General transitions towards an asset-light, higher-margin, faster-growth business.

Legal & General's longevity is down to its business model: life insurance and long-term savings. It is one of the largest retirement, life-insurance, and annuity providers in the country, operating under strict rules to ensure management runs the business prudently with a long-term mindset.

This means the business is relatively boring compared with other blue chips – boring, but not unprofitable. Legal & General throws off cash and has established itself as one of the UK's top income stocks, with a yield consistently in the high single digits.

Usually, such a high dividend would be a warning sign. Yields significantly higher than the market average usually indicate that investors believe the payout is unsustainable. In this case, however, the high yield and low valuation are more a reflection of the market misunderstanding the business model.

Legal & General is a dominant leader in the bulk-purchase annuity market and the largest provider of term life insurance in the UK. Both of these products are financially complex, involving multi-decade liabilities and, as a result, are heavily regulated.

There are strict rules governing how much capital the company must hold to meet its liabilities. Even for the most sophisticated financial analysts, determining how much revenue a bulk-annuity purchase or a term life-insurance product will generate over ten or 20 years is not straightforward.

You only need look at the firm's peers to understand this isn't a problem affecting only Legal & General. Chesnara, Standard Life (formerly Phoenix) and Just Group are all cheap and offer high yields. The problem is so bad that private-equity group Brookfield recently offered a 75% premium to buy Just. Standard Life has also decided to rename the company to focus on its more visible pension products, moving away from the old Phoenix brand, which was known as a closed-book consolidator.

This isn't just a problem in the UK. In the US, Brighthouse Financial (originally spun off from MetLife in 2017 to focus on retail life insurance) was acquired last year for a 55% premium. Athene was acquired by private-equity giant Apollo in 2022 for a 20% premium. Athene-backed Athora is in the process of acquiring the UK's Pension Insurance Corporation for £5.7 billion.

Jackson Financial, formerly the US arm of London-listed Prudential, spun off in 2021, has been so neglected that management has been able to acquire 40% of the outstanding shares in the past five years from cash flow as well as distributing a handsome dividend.

Times are changing, and so is Legal & General

Legal & General is becoming increasingly less reliant on its bulk-annuity, pension-buyout and life-insurance businesses. Instead, its asset-management and retail arms are driving an increasing share of profit. With £1.2 trillion of assets under management, Legal & General is one of the UK's largest investment-management firms.

It manages the funds attached to the defined-contribution (DC) pension schemes it manages, funds for international clients and a growing portfolio of private assets. Its private-market assets grew from £57 billion to £75 billion last year, which helped the overall fee margin on assets under management rise from 8.8 basis points to 9.1.

The group's workplace defined-contribution pension platform will be a key driver of growth going forward. According to the Pensions Policy Institute, the aggregate value of private-sector workplace assets could grow from around £1.2 trillion in 2025 to around £2.2 trillion in 2045, or £4.4 trillion in a best-case scenario. There will also be significant consolidation among the major players. By 2035, the market is projected to comprise only 15 to 20 large DC “mega-funds”, down from more than 60 providers today.

Legal & General's workplace DC assets under administration rose 21% to £114 billion in 2025. Net flows totalled just £6.2 billion. But management believes workplace saving is now the group's “core customer acquisition engine” and the group expects £40 billion to £50 billion in net flows by 2028. The group's retail arm includes annuities, lifetime mortgage and retail insurance products.

Other revenue streams also suggest the business is firing on all cylinders. In the institutional retirement arm, the group has flagged a contractual service margin (CSM) of £12.4 billion, up 2% year on year. This is the unearned income the group is forecasting it will generate from its book of annuities – equivalent to roughly 214p per share, net of tax.

Management announced a £1.2 billion share buyback alongside the company's 2025 results – the largest in the group's history – on top of a 2% dividend hike. Total cash returns this year will come in at £2.4 billion, with management saying it expects £5 billion of shareholder returns from 2025 to 2027, 35% of the company's market value.

Based on these projections, shares are trading at a total shareholder yield of 16.7% for 2026 and a historical price-to-earnings (p/e) ratio of 11.9, although this does not account for long-term profit-generation potential, as highlighted by the group's forecast CSM. Legal & General is continuing its transition to a cash-generative, asset-light business. Investors should take note.

Rupert Hargreaves owns shares in Legal & General

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How is Russia's economy doing?

Before the Iran war oil shock – meaning a jump in oil prices and a jump in revenues for the Kremlin – things were looking as bad as they have done since Russia's invasion of Ukraine in February 2022.

At that time, many Western politicians and economists expected Russia's economy to collapse under the pressure of sanctions and fiscal implosion. “The Russian economy is on track to be cut in half,” said then US president Joe Biden a month into the war. “It was ranked the 11th biggest economy in the world before this invasion – and soon it will not even rank among the top 20.”

How wrong was Joe Biden about Russia?

Very wrong. By 2025, Russia had nudged up the table to become the ninth biggest economy globally, overtaking Canada and Brazil, and lying just behind the UK, France and Italy. In response to sanctions, Russia ramped up state spending on its war machine, driving an unlikely economic mini-boom, and predictions of collapse proved wide of the mark.

A shallow recession of 1.4% in 2022 was followed by solid positive growth in 2023-2024, partly facilitated by high oil prices and partly fuelled by the rise in war-related spending and corporate credit growth. The fiscal position deteriorated, but remained in relatively safe territory, while a consistent current-account surplus “helped soften the impact of approximately half of Russia's international reserves being immobilised”, explains Marek Dabrowski of the Bruegel think tank. All told, the post-2022 Russian economy demonstrated striking resilience.

How is Russia's economy so resilient?

Essentially, Russia has resources and products that other countries want to buy. If the price is right that trade will happen, albeit with Russian oil and gas trading at a discount to pre-war prices. Western sanctions, which have in any event been supported by nations making up less than half the world's economy, were too telegraphed, slow, and easy to circumvent via third countries, given the weak enforcement of secondary sanctions. And China's role in ramping up Russian imports and exports was crucial: it has taken the place of Europe as Russia's biggest trading partner.

Second, the Russian regime was ready for war. It had planned for sanctions for years, stockpiling dollars, and when the crunch came it forced many foreign companies to sell their Russian entities at low prices. And third, the de facto creation of a war economy has not only fuelled growth, but also entrenched a network of supporters of the regime among the business class.

Is Russia's economy a war economy?

Over the past four years, Russia's economy has been growing, but only because civilian industry has been “progressively cannibalised” to feed dramatically ramped-up military production, say Emma Sage and Savannah Taylor on War on the Rocks. Germany's foreign intelligence believes that the war accounts for 10% of GDP and for more than 50% of government spending. Russia's Centre for Macroeconomic Analysis and Short-Term Forecasting attributes 60%-65% of Russia's increased industrial output from 2022-2024 to the sectors most implicated in the war on Ukraine, while showing that unrelated industries are declining. Meanwhile, domestic consumption is underpinned by Smertonomika, or “Deathonomics”, whereby wages for soldiers willing to brave the war – and compensation payouts to their families when they are killed – have soared. Pay for soldiers is six times what it was in 2022, while death payouts have risen to the equivalent of $130,000-$180,000 – more than the expected life earnings of many of the young men who die. In short, Russia has mortgaged its future to pay for the war. Eventually, that will have to be repaid.

What is the current situation in Russia?

Stagnation has set in and the government is $320 billion in debt. Growth fell sharply last year from 4% in 2024 to less than 1% in the fourth quarter of 2025. This week Russia's president, Vladimir Putin, announced that GDP declined 2.1% in the year to January, with industrial production also falling by 0.8%, even as unemployment remained low at 2.2%, while inflation stood at below 6%. Many Western analysts suspect the reality is worse. The economy will not collapse, says Alexandra Prokopenko in The Economist. “But nor will it recover. It has entered what mountaineers call the death zone: the altitude above 8,000 metres at which the human body consumes itself faster than it can be repaired.” Russia is sustaining a “negative equilibrium”: it has the ability to hold itself together at the cost of steadily destroying its own future capacity. Export revenues are falling and economic weakness means budget gaps cannot be filled with additional tax revenues.

Will the Iran war rescue Russia's economy?

Obviously no one knows how long the oil price will remain elevated from its pre-war levels. But Putin himself – sometimes touted in recent weeks as the “real winner” of the conflict – isn't exactly celebrating the dawn of a free-spending new paradigm. This week, he called on oil and gas companies to use additional revenues from the current rise in global hydrocarbon prices to reduce their debt burden and repay obligations to domestic banks. Clearly, Russia is a beneficiary of the conflict in the Persian Gulf and Middle East, with higher prices and (perhaps) higher export volumes to Asia able to narrow its budget deficit. “But unless disruption to global energy supplies is prolonged, this is unlikely to materially alter Russia's macroeconomic outlook,” says Liam Peach of Capital Economics. The country will remain a war-driven, low-growth, low-productivity economy that's dependent on hydrocarbons – a waning resource in the long run – and under chronic fiscal pressure. “Russia can probably continue waging war for the foreseeable future,” says Prokopenko. “But no climber can survive the death zone indefinitely – and not all climbers who attempt the descent survive it.”

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Prices of commodities flatlined between January 2024 and the start of 2026 – now they are rocketing. The S&P GSCI index of 24 major raw materials has surged 29% since 1 January. That reflects a heavy weighting towards energy, which accounts for more than half of the index's composition. Higher oil and gas costs will also feed through into agriculture prices, the index's second-biggest component. US wheat futures have risen 15%.

The Middle East isn't just a source of hydrocarbons, says The Economist: 22% of the world's traded urea (a fertiliser), one third of its helium and 45% of its sulphur (used as a plant nutrient) comes from the region. The Gulf is also a major source of petrochemicals required for everything from basic pharmaceuticals to glycol (a paint ingredient). With spring planting “imminent” in the northern hemisphere, a squeeze on fertiliser supply that lasts another few weeks risks “catastrophic” consequences for global harvests later this year.

Commodities rise sees industrial metals miss out

The commodities uplift has not carried over into metals, with the S&P GSCI Industrial Metals index flat since the start of the year. Aluminium prices have risen 8% since 1 January; the Middle East accounts for 9% of global production. But nickel has gone nowhere, while copper (down 4% this year) has been behaving like gold, suffering a pullback after a multi-year boom. The prospect of global stagflation doesn't bode well for the industrial demand that underpins metals markets.

Copper entered the year with “a dose of the metals fever” amid dire warnings that soaring demand for electricity will cause shortages, says Andy Home on Reuters. Yet while traders bet on copper shortages later this decade, current supplies are ample. In the US, Chicago Mercantile Exchange warehouse stocks have rocketed from 85,000 tons at the start of 2025 to 536,000 tons today (US stockpiling has been turbocharged by attempts to beat import tariffs). “The gap between speculators' great expectations” and the “current reality” of well-supplied warehouses “yawns ever wider”.

The structural metals story could yet come true, says Alan Livsey in the Financial Times. Sluggish prices between 2015 and 2022 prompted major global miners to cut spending on new mines by “at least a third” and focus on paying dividends instead. While investment started rising again in 2023, mines have very long lead times. The consequences of historic underinvestment will soon loom large. Real assets enjoy other attractions. They provide a hedge, both against bouts of inflation and a prolonged fall in the dollar, which presently appears somewhat overvalued. And at a time of AI-driven concentration risk, investors are eager to diversify into other themes. “Commodities tend to go through cycles,” says Evy Hambro of BlackRock. “We appear to be in the foothills of the next cycle.”

Why gold has lost its shine

Investors looking to gold for relief from the energy shock have been left disappointed. Gold has fallen 16% in dollar terms (and 15% in sterling) since hostilities began on 28 February. You would expect gold to do well at a time of war and inflationary pressure.

So why the pullback? Firstly, gold had already been on a record-breaking rally that saw it reach an all-time high in late January. Having rocketed 174% over the previous two years, the yellow metal entered the conflict looking overextended. Secondly, gold is strongly influenced by real interest rates (interest rates adjusted for inflation). While inflation looks poised to rise, so are interest rates, reducing gold’s appeal relative to competitors such as government bonds.

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As the oil crisis gathers momentum, it remains to be seen how events play out in the Persian Gulf – a ceasefire might be agreed with Iran and the shipping lanes might start to reopen, as might the production facilities. But as the week started, it did not seem likely. Oil spiked over $100 a barrel, and across Europe, natural-gas prices more than doubled. By Tuesday morning, they had started to fall again. And in real terms, $100 is not in any cases all that extraordinary a price for oil. The real-terms price was $131 in 2008 and $104 after the start of the Ukraine war.

Still, the rise is already pushing up costs across Europe and Asia. And it is Britain that will be hit hardest of all. Twenty years of deluded policymaking is about to be brutally exposed if oil stays at these levels. Why? Firstly, the UK is critically dependent on imported energy. We have been steadily running down domestic production in the North Sea with a punishing mix of windfall taxes and bans on new exploration, while assuming that wind and solar power would make up the shortfall.

That has not happened and it has cost far more than anyone expected. Instead, we rely on massive imports of natural gas to keep the power stations running and imports of oil to keep the petrol pumps open. As it happens, Britain does not import huge amounts of gas from the Middle East, but we still have to pay the global price. If we had our own production, not only would it increase global supply (and therefore reduce the price, at least marginally), but more importantly, in a crisis, the government could always requisition supplies. As it is, when prices go up, we feel the full brunt of it.

An oil crisis will lay waste to British industry

Secondly, an oil crisis will lay waste to industry. What remains of manufacturing was already getting hammered by industrial energy prices that are twice those of France and four times the US's. Car output has fallen back to levels last seen in the 1950s, as has cement production. Huge swaths of the chemicals industry have closed down. With oil and electricity prices almost doubling, what remains will be in deep trouble.

Many manufacturers that were just about breaking even will now have to close and the damage will quickly spread to retailers, cafes and restaurants if their power prices go up as well. Business was in bad shape already. This will finish many of them off.

Thirdly, we rely on massive amounts of foreign borrowing. The rising oil price has already led to a sharp rise in gilt yields. The government's finances will be in worse shape than ever and that is before ministers panic and launch a bailout to try to control the price rises. Almost a third of the £100 billion-plus the UK has to borrow every year comes from overseas. If there is a general sell-off of government bonds, and that is looking more and more likely all the time, then the UK will inevitably be right in the centre of the storm. Sterling is a big enough currency that it can be traded in volume, but not so big that its central bank can control the market. We can be sure the hedge funds will be shorting gilts and sterling if sentiment turns against the UK.

Stagflation is our best hope

Finally, the government was banking on falling oil prices to have any hope of growth. The only real plan that remained was for the Bank of England to steadily reduce interest rates as inflation came under control, reducing mortgage rates and stimulating demand. Chancellor Rachel Reeves kept boasting interest rates coming down were one of her major achievements. In the wake of the oil-price spike, traders have cut the chances of another cut from the Bank this year to zero. Worse, rates might even have to rise if prices spike upwards. With taxes rising at the same time, and unemployment going up as well, stagflation is the best we can hope for. By the autumn, the UK may have tipped into a full-scale recession.

In short, a government that has already sunk to 20% or less in the polls is going to be in deep trouble. It did not have much of a plan for kick-starting growth or for improving living standards to start with, but what little hopes it may have had for the economy have now been dashed. Its own policies have been making the energy crisis worse, not better. An oil crisis is the last thing Labour needs this year. It will painfully expose all the frailties of the British economy – and right now it looks as if it may be too late to do anything about it.

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It is not easy to say what the Iran crisis means for markets, not least because it changes hourly. I write this on Wednesday; by Friday, anything could have happened, as Monday's near-$30 swings in the oil price have shown.

The logical assumption is that the Iran crisis will pass and energy prices will fall back. This has been the pattern in Middle East upheaval for at least a couple of decades. In that case, there is not much to be gained from fretting about short-term swings. For most of the last two weeks, this has been the consensus among investors. Markets have been much calmer than you might predict, with a few exceptions, such as the pullback in Korea, which has been flying of late. Ignore the hyperbolic headlines about “tumbling” and “plummeting” on drops of 3% or so: stocks have not been panicking so far.

Still, we can think of cases where the impact did not pass quickly (eg, Russia's invasion of Ukraine and, indeed, various events in the Middle East longer ago). That scenario favours US markets and the US dollar over most of the rest of the world in the short term. The US has greater energy security – it is a net oil exporter, and high prices will encourage shale oil producers to boost output. This is already being reflected in markets: the dollar is slightly stronger and US stocks are performing better.

With that in mind, note that while non-US stocks beat the US last year, it was only in the US where earnings met expectations, points out Paul Niven of F&C Investment Trust (LSE: FCIT). Investors who have run up European shares are keen to see growth come through. The longer the crisis goes on, the less likely that is and the more scope for market setbacks.

Three reasons to fear the Iran crisis becoming a longer war

The obvious reason for optimism is that prolonged disruption to oil exports will benefit almost nobody. Yet if you want to be a pessimist, the three main participants may feel otherwise. Iran could have an incentive to maximise disruption this time because it will make the cost of attacking it again in future seem much higher. Israel might want to continue until Iran's government falls and its military capabilities are destroyed.

The US gains nothing from a protracted crisis that keeps oil prices high, but it seems to have started this fight without a clear plan for finishing it. Markets took Donald Trump's comments about the attack being “pretty much over” as reassuring, but perhaps they should have been spooked by clear signs of an erratic president who did not seem to be in command of the facts.

So the outcome is anybody's guess. All we can say is that the world keeps looking more volatile. There have always been financial shocks (“markets climb a wall of worry”, as the adage goes), but the key difference today is that the geopolitical framework in which we invest is becoming more less stable. One key implication of this is that inflation will be more volatile because supply chains are more easily disrupted. Inflation protection – real assets and stocks with pricing power – will be increasingly important.

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The war in Iran is keeping the price of oil incredibly high. The commodity reached a recent peak of $110 for a barrel of Brent crude on 4 May, potentially meaning higher prices for your petrol, food, and even your mortgage.

While prices calmed down through the week, reaching around $100 a barrel on 8 May, they remain far higher than before the war as the supply of the vital material is still heavily constrained.

The Iran war has led to increased uncertainty for the oil trade as it has become less safe to extract and ship oil from the Middle East to the rest of the world.

The threat of missile strikes from either the US or Iran means there is a highly increased level of risk involved in the trade.

On top of this, the Strait of Hormuz, a narrow waterway between Iran and Oman through which around 20% of the world’s oil is transported, has remained shut since the war began on 28 February.

As supply has been disrupted while demand has remained the same, the price of the commodity has soared, rising from around $73 on 27 February to $100 on 8 May, an increase of nearly 37%.

One of the clearest consequences of this has been on prices at the pump but, as oil is vital in the manufacturing process of many goods we consume every day, a rise in the price of oil has led to a general increase in inflation.

The latest data from the Office for National Statistics (ONS) showed inflation jumped to 3.3% in the year to March, an increase of 0.3 percentage points compared to the year to February.

With inflation on the rise, households will start to see their budgets stretch and it could mean their savings are eroding in real terms if inflation is higher than their interest rate.

We look at why oil prices are rising and what it could mean for the UK economy, interest rates and fuel prices.

Why the conflict in the Middle East has impacted oil prices

There are two key reasons why the price of oil has increased due to the war.

The first is that the conflict is bad for business. A great deal of the world’s oil is extracted from countries near Iran and war in the region means it becomes much more risky to continue normal operations.

In the first days of the war this was made very clear, as Iran fired retaliatory missile strikes on many countries in the Middle East, including the United Arab Emirates, Oman, and Cyprus, among others.

The second is that Iran (and later the US) was able to halt traffic through the Strait of Hormuz and hurt the world’s oil supply by effectively blocking 20% of it from being transported and stranding oil tankers in the Persian Gulf.

While the oil supply has reduced, the demand has remained the same, meaning the price of oil has increased.

But it’s not just oil that has had its supply constrained thanks to the war. Other goods are also impacted.

One example is fertiliser – around 30% of the world’s supply is shipped through the strait. Like in the case of oil, lower supply and steady demand have meant fertiliser prices have increased, which could lead to increased food prices later on.

Where prices go next will largely depend on how long shipping will be disrupted for.

How does the oil price affect the price of petrol?

One of the most direct consequences of higher oil prices is the impact on what you pay at the pump, given that oil is vital in the manufacture of petrol and diesel.

Before the conflict began, the average price of a litre of petrol was 133.8p (142.3p for diesel).

But between 28 February and 8 May, the average price of a litre of petrol has increased by 24.3p, while diesel has increased by 46.5p, according to RAC Fuel Watch.

That means the average price of a litre of petrol is now 157.6p (187.9 for diesel). That is a significant increase, but it does not exactly mirror the extent that oil prices have risen in the same period.

This is because more than half the price of a litre of petrol is tax. Fuel duty accounts for around 34% of what you pay at the pump, while VAT accounts for a further 17%.

The price of the oil itself only accounts for 34% of the price of a litre of petrol in the UK. In theory, that means a 10% rise in global oil prices might increase the price of petrol by around 3% or 4% (though it isn’t necessarily that straightforward in reality).

Could higher oil prices increase inflation?

While petrol and diesel prices are some of the fastest to react to the increased price of oil, that does not mean they are the only costs that will increase.

Oil is used in the manufacturing process of many goods we consume each day. This includes goods as varied as plastic, crayons, shoes, backpacks, iPhones, pillows, and much more.

With oil being more expensive, the overall level of prices in the UK is also higher.

The latest data from the ONS showed that inflation was 3.3% in March, and most analysts estimate that price growth will continue to increase.

Economists at the Bank of England think inflation could reach a peak of around 3.5% in the third quarter of 2026.

Much of this increase will come from rising energy prices. These increased energy costs will not only affect households, but also businesses. Firms will likely hike their prices to make up for increased energy costs.

Experts are also warning that the inflation associated with the impact of the war poses a threat to the UK economy.

The International Monetary Fund gave the UK the biggest growth downgrade of any country in the G7 when it published its latest economic outlook, now anticipating the economy to grow by just 0.8% this year.

Meanwhile, with inflation expected to rise again, most economists agree that it will be quite some time before we see the Bank of England cutting interest rates again.

Indeed, the market is currently pricing in interest rate hikes this year, though some economists say that while this is certainly much more of a possibility, it is more likely that the central bank will freeze rates for the foreseeable future.

Read more on the inflation forecast for 2026 in our guide.

Could higher oil prices increase your energy bill?

The conflict is expected to have a significant impact on the next Ofgem energy price cap.

Ofgem determines the price cap by working out the average wholesale price of energy in a three month period, and the observation period for the July price cap will include the war and its consequences on energy prices.

That means that even if the ceasefire lasts and a lasting peace is achieved, much of the damage to energy prices is already baked into the next price cap.

As such, the July to September price cap is expected to reach £1,836 per year – an increase of more than 12%, or around £195 per year, when compared to the current level in place between April and June, according to energy consultancy Cornwall Insight.

As 2025 – the best year for gold price gains since 1979 – drew to a close, the question on the lips of everyone following the precious metal was whether the price would clear $5,000 per troy ounce during 2026.

Deutsche Bank analysts put out a report in November last year that suggested the price of gold would come agonisingly close, peaking at $4,950 during the course of the year. At the time, that felt optimistic, if not wildly so; gold closed at $4,163 on the day the report was published.

In the event, it took just 23 days of 2026 for the gold price to clear the high end of Deutsche Bank’s predicted range for the year. Gold then passed the $5,000 mark for the first time on the following trading day, 26 January – then, just three days later, it reached $5,500. Gold prices even briefly cleared the $5,600 mark on the morning of 29 January.

So while it would have sounded almost impossibly far-fetched a month ago, it now seems fair to ask whether gold might soon pass the $6,000 mark.

De-dollarisation and Iran tension boost gold

Two factors in particular drove the price of gold upwards during its dramatic surge on the week commencing 26 January: a weakening US dollar, and increased geopolitical tension particularly around a standoff between the US and Iran.

Gold tends to be priced in dollars. If the dollar loses purchasing power, it takes more of them to buy an ounce of gold; the price of gold rises. That’s why gold is often considered a hedge against inflation.

The US dollar index – which tracks the strength of the currency relative to a basket of other major global currencies (including the euro, the Japanese yen and sterling). It has fallen nearly 2% through 2026 to date, as of 29 January.

US president Donald Trump boosted gold prices on 27 January when he appeared to dismiss concerns over the currency’s slide, telling reporters that “the dollar’s doing great”.

Gold is also viewed as a hedge against geopolitical instability, and once again Trump has been at the centre of an upward ratchet on that front. The president has increased threats to attack Iran for the second time in his year-old second term, with the aircraft carrier the USS Abraham Lincoln having entered the Middle East region this week.

“US naval and air forces are building up in the Gulf as the US has ratcheted up threats on Iran,” said Susannah Streeter, chief investment strategist at Wealth Club. “President Trump has warned that the US is ready to act, if Tehran does not reach a nuclear agreement.”

Long term gold price drivers

While gold has made explosive moves early in 2026, this is only the most recent chapter of a long-standing bull run.

Over the last 12 months, the price of gold has more than doubled.

The initial catalyst for this rally was an increase in gold purchases from global central banks, particularly in the wake of Russian assets being frozen in response to Russia’s invasion of Ukraine.

“The rally has been striking, fuelled by bullish sell side views, sustained central bank buying, and a sense among investors that they remain under-allocated to the asset,” said Lousie Dudley, portfolio manager for global equities at Federated Hermes.

But Dudley warns that the rise could start to undermine the very appeal of gold that has made it sparkle.

“Some worry that gold is now drifting into the broader risk-on trade,” she said. Its rise in tandem with industrial metals raises “questions about whether gold is still acting as a reliable hedge in a risk-off environment”.

Even so, there is a strong case to be made for holding some gold in your portfolio. If you feel you are under-exposed, read our explainer on how to invest in gold.

Investors who are among those who have taken money out of UK equity funds this year may be kicking themselves as FTSE 100 heads for another record 12 months.

Analysis by AJ Bell shows the FTSE 100 is on track for its seventh best year ever, with its highest return since the aftermath of the global financial crisis – up 22.8% year-to-date including dividends.

Despite a lack of major technology stocks in the index, the FTSE 100 is returning more than twice what it achieved last year and ahead of the 17.2% from the S&P 500 index which has been boosted by the performance of the Magnificent 7 in the US.

A much-anticipated Santa rally in the UK market could push returns up further.

It comes despite net outflows from UK equity funds remaining high for much of the year amid economic uncertainty.

Source: AJ Bell, LSEG. Total return. 2025 data to market close on 1 December.

Dan Coatsworth, head of markets at AJ Bell, comments: “There may therefore be a lot of people kicking themselves that they’d taken money out of the UK market. The year has been full of stories about sustained net outflows from UK funds, which is a surprise given the headline performance of the FTSE 100.

“This year’s success for the blue-chip index is not a flash in the pan. The FTSE 100 has delivered positive returns in eight of the past 10 years, averaging 9.1% annually over that period including dividends. This kind of performance reinforces the attraction of investing over the long term. There may be years when performance disappoints, but history suggests it’s worth pursuing.”

Here are the stocks that have performed best on the FTSE 100 in 2025.

Best and worst performing FTSE 100 stocks for 2025

Traditional sectors such as mining, metals, financials and defence have been the main drivers of the FTSE 100’s performance in 2025.

Metals producer Fresnillio has had a golden year, returning 364%, while mobile money service Airtel Africa has returned 179%.

Rolls-Royce has ranked among the top performers for the third year in a row, which Coatsworth said is helped by positive market sentiment towards anything linked to the defence sector.

Meanwhile, with a total return of 80%, Lloyds Bank’s share price is performing just as well as many technology stocks across the pond in the US.

Source: AJ Bell, ShareScope. Data to market close on 1 December 2025. Total return including dividends.

There have been some pretty poor performers this year though, which may be deterring investors from the wider market.

Media group WPP has seen its total share price return fall 60% year-to-date, while distributor and outsourcing brand Bunzl is down 31%.

Drinks brand Diageo appears to have been hit by Trump tariffs as well as changing consumer tastes, pushing its share price down 28%.

Even while UK shares have done well, it’s somewhat ironic that the country’s leading stock exchange operator the London Stock Exchange Group is one of the worst FTSE 100 performers – down 21%.

Source: AJ Bell, ShareScope. Data to market close on 1 December 2025. Total return including dividends.

Coatsworth attributed this to struggles to get companies to list in London as well as competition from AI for data.

He added: “Three quarters of the FTSE 100 delivered a positive total return in 2025.

“Fifteen names returned more than 50% including retailer Next, miniature fantasy figures maker Games Workshop and copper miner Antofagasta. Nine out of the top 20 best performing stocks in the FTSE 100 were in the broader financials sector, covering banks, insurers and asset managers.

“The number of true howlers was small, led by media group WPP, distribution business Bunzl and drinks group Diageo. It was also a bad year for packaging group Mondi and car portal Auto Trader, among others.”

Gold has risen more than 60% this year to over $4,300 per ounce. In doing so, it has transformed the outlook for the gold-mining industry after years plagued by post-pandemic supply chain snarl-ups, a lack of labour and the 2022 energy crisis.

Last quarter, gold producers generated roughly 50% more free cash flow than consensus estimates, notes Jim Luke, who runs Schroders ISF Global Gold among other funds. Importantly for investors, most companies are not rushing to spend this windfall.

Miners are still running their businesses using “conservative gold price assumptions” of around $2,500 to $2,800 per ounce, and letting cash build up on their balance sheets. In the first quarter of 2025, the sector moved from a net debt to a net cash position for the first time in more than 20 years.

Gold miners are deeply undervalued

As a result, gold miners now look deeply undervalued. Across the mining sector, the price/earnings (p/e) ratio has halved over the past decade, while the gold price has more than doubled, note Keith Watson and Robert Crayfourd, managers of the Golden Prospect Precious Metals (LSE: GPM) and CQS Natural Resources Growth and Income (LSE: CYN) investment trusts. “While there has been some recent performance, it’s not fully reflective of the current spot price, and that creates the opportunity.”

The big miners have now become cash cows, and analysts are struggling to catch up. Last week, Canaccord Genuity published a note on London-listed Fresnillo (LSE: FRES) for the second time in five weeks, revising its earnings targets higher by more than 70% for 2026.

“Our profitability profile for Fresnillo has moved faster than at any other time under our coverage,” they say. Two years ago, the firm’s capital spending commitments were consuming all of its operating cash flow. Today, cash flow exceeds spending by three times.

The cash influx is likely to lead to a rush in mergers and acquisitions (M&A) over the coming months and years. “It’s still cheaper to buy assets than to build them, and buying avoids the execution risk associated with development,” say Watson and Crayfourd. “We expect to see larger companies begin to focus on growth, which will create a bid for developers and smaller producers to be acquired.”

How to invest in gold miners

Funds that own a spread of larger miners, smaller producers and explorers could be the best way to capitalise on the sector. Golden Prospect is a pure play on precious metals, with roughly 85% in gold stocks. CQS Natural Resources has about 50% invested in precious metals miners, as this is where Watson and Crayfourd see the greatest value in the commodity space.

The BlackRock World Mining Trust (LSE: BRWM) and the open-ended BlackRock Gold and General Fund are both managed by the well-resourced Thematics and Sectors team at BlackRock, headed by mining-sector veteran Evy Hambro. As such, the investment trust team at Winterflood thinks these are some of the best ways to build exposure to the sector as a “one-stop shop” for investors looking for commodities exposure. Gold and General is a pure play, with almost 90% in gold and most of the balance in silver, while World Mining has 36% in gold.

There are also several other active funds that invest in gold and precious metals, as well as a growing number of passive exchange-traded funds (ETFs) that track various gold-mining benchmarks. The latter include Van Eck Gold Miners (LSE: GDGB) and L&G Gold Mining (LSE: AUCP). Both of these have done very well over the past year, but as the difference in returns – 83% versus 103% – shows, different funds and indices can have very different outcomes.

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Digital currencies (cryptocurrencies) have moved from the outer fringes of investing into the mainstream in recent years. While it’s been a roller-coaster ride for investors, crypto is here to stay. Governments and regulators progressed from ignoring it to fighting it; now they are trying to jump on the bandwagon by allowing investors access through exchange-traded funds (ETFs). However, while bitcoin might not be in a bubble, some of the companies involved in it are.

Chief among these is the group of companies known as bitcoin treasury companies. These firms’ business models involve buying a load of bitcoins and holding them on their balance sheets in the hope that investors will be willing to value their shares at a premium to the value of the bitcoin. They would then promise to take advantage of this premium to issue more shares, which could be used to buy more bitcoin, in the hope that those who invested would see the bitcoin per share holdings increase.

Trouble ahead for bitcoin treasury companies

Incredibly, this model worked for a time, with some companies trading at twice (sometimes more) the value of their net crypto assets. However, because mainstream financial institutions now offer products such as ETFs, it has become much simpler for even cautious investors to buy crypto, so bitcoin treasury companies have become much less attractive. As a result, the valuations they can command have started to dwindle. Meanwhile, some bitcoin treasury companies have struggled to issue more shares, leaving their investors with a large amount of very expensive bitcoin.

One such company is Strategy (Nasdaq: MSTR). While Strategy has its own business software and intelligence business, most analysts believe that virtually all its value resides in its 640,000 bitcoin, the largest corporate holding in the world. The problem is that while this pile is worth around $73 billion at current prices, Strategy also has debts of $11 billion. Overall, this means that it trades at a 40% premium to the value of its bitcoin, using the industry’s preferred metric. In other words, those who invest in the company are paying $1.40 for every $1 worth of bitcoin that Strategy holds, a pretty poor deal, especially compared with holding bitcoin directly or through an ETF.

Despite the ongoing appreciation of bitcoin, Strategy’s share price is currently trading below both the 50-day and 200-day moving averages, and is significantly down from its peaks earlier this year. I would therefore suggest shorting Strategy at the current price of $305 at £5 per $1. At the same time, I suggest that you go long on bitcoin at the current price of $114,639 at £1.50 per $100. This means that as long as the price of bitcoin outperforms Strategy’s share price, you should make money. To limit your losses, I would cover your position in Strategy if its share price rises above $610.

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Two companies – Nvidia and Microsoft – each are worth more than $4 trillion. Together, that’s more than India’s and Japan’s combined annual output. Price is what you pay, as Warren Buffett put it. Value is what you get. Our question for today: how much value will investors get from the Magnificent Seven?

Our Law of Conservation of Value tells us that prices cannot stray too far or too long from value. And value depends on output. Investors ought to be able to look to a future stream of income and from it earn their money back, and more. Even in the dotcom bubble in 1999, the top firms were not as valuable or as concentrated as they are today. Nvidia, Microsoft, Alphabet, Apple, Meta, Tesla and Amazon – together, these firms make up a third of total US stock market value, an amount roughly equal to China’s GDP.

Part of the appeal of these stocks is that they are widely believed to be taking advantage of AI technology. In the case of Nvidia, of course, that is the central appeal. But the others are investing heavily in AI too. In 2024 and 2025, Meta, Amazon, Microsoft, Google and Tesla will put more than half a trillion into AI. The revenue from these investments is expected to be around $35 billion. Amazon, for example, has invested more than $100 billion, which is thought to generate an extra $5 billion in revenue.

We don’t know how reliable or meaningful these figures are. What we do know is that they aren’t very impressive. As in the dotcom boom of the late 1990s, AI is not paying off. Huge investments are being made in the hope of creating AI-based wealth. But so far, the output doesn’t measure up.

You can go to ChatGPT, for example, and pay for the service. Many people use it occasionally – including us. But few pay for it – also including us. This would be fine, except that so much investment has gone into AI development that anything less than spectacular results will look like failure. One estimate, from Goldman Sachs, showed that the Magnificent Seven big tech stocks would have to produce $600 billion in extra annual revenue to make sense of their investment.

How will the AI boom end?

The appeal of the dotcom era was the idea that more information would lead to higher GDP growth rates with less need for capital investment.

Costly trial-and-error expansion would be replaced by less costly, more precise, knowledge-driven growth, or so it was believed. It didn’t work out that way. Productivity and growth rates generally softened throughout the 21st century. Capital investment went down. The internet/information revolution did not compensate for the decline; it seems to have made it worse. In the last half century, the rise in labour productivity in developed economies has declined from about 2% annually in the 1990s to 0.8% in the last decade, says the OECD think tank.

Will that change with AI? Probably not. The defining curse of the information revolution was too much information. It piled up. It got distorted and misinterpreted. It took time and money to store and sort. Much of it was false or useless. Now cometh AI, adding to the problem. Which leaves, at least for now, AI and the Magnificent Seven in an old-fashioned bubble. Stock prices are far higher than actual sales and profits can account for. So one way or another price and value will have to come back together. Some breakthrough might lead to a big burst of gains and growth. More likely is that stock prices will fall.

For more from Bill, see bonnerprivateresearch.com

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Past performance is not a reliable guide to the future. However, investors’ portfolios can benefit from UK shares that have consistently and substantially outperformed the stock market. One of the best ways of measuring consistent outperformance is to select several different time periods, over all of which a company’s shares should have outrun the market.

We will take one-year, six-year and 12-year periods and look for companies that have gained more than the FTSE 100 over all three time spans. Six and 12 years are chosen since five years would take us back to 2020, when stocks were slumping owing to Covid. It is more reliable to measure growth from 2019 to 2025.

Taking 16 April 2025 as our reference date (after stocks reacted to Donald Trump’s tariffs), the FTSE 100 had gained 5.8% over one year, 11.6% over six and 28.7% over 12 years. There are at least 12 British companies from several different sectors that have easily beaten the blue-chip index over all three periods. We will discuss these 12, examine the reasons they have done so well and gauge whether their outperformance will continue.

Two stocks leading the pack

Two companies from the 12 stand out as having exceptional outperformance. These are Games Workshop and 3i Group, both FTSE-100 firms. Games Workshop has gained 45% in a year, 248% over six years and 1,997% over 12 years. In 3i’s case, its shares have gained 48% over one year, 287% over six years and 1,161% over 12 years. Games Workshop’s gains are even better than those of Magnificent Seven US firms, such as Amazon, with -4%, 73% and 1,230% over one, six and 12 years, respectively and Alphabet (Google’s parent company) with -4%, 145% and 615%. The gains made by 3i beat Alphabet over all three periods and Amazon over all but 12 years.

Games Workshop’s best-known product is the Warhammer series of games. Hobbyists of all ages enjoy collecting, modelling, painting and tabletop-gaming with their miniatures. This hobby is global and supported by a wide range of books, audio books, electronic games and Warhammer TV. Games Workshop supplies its global hobbyists through its own stores or trade outlets, and by licensing its deep and extensive range of intellectual property. It has just concluded negotiations with Amazon for adapting the Warhammer 40,000 universe into films and TV series, together with associated merchandising rights.

3i Group is an investment company specialising in private equity and infrastructure. It invests in mid-market companies in Europe and North America. Its private-equity (PE) portfolio has over 50 companies, with about half that number in the infrastructure portfolio. Action is an example of 3i’s PE portfolio companies. Based in the Netherlands, it is the fastest-growing non-food discounter in Europe with 2,918 stores in 12 countries. Action reported sales growth of 10.3% for the year to December 2024 and paid a dividend of £215 million to 3i, leaving it with a cash balance of €814 million.

Defence stocks

Our 12 companies include three from the aerospace and defence sector: BAE Systems, Cohort and Rolls-Royce. All three have benefited from the realisation by major European countries that they can no longer regard the US as a reliable ally, given Donald Trump’s behaviour since taking office in January. European countries have realised that they need to increase their support for Ukraine and raise their defence budgets to over 3% of GDP – a figure that, among large countries, only Poland exceeds at present, with 4.2%.

It is raising this figure to 4.7% this year. The UK government has pledged to raise its defence budget from 2.3% to 2.5% of GDP by 2027 and to 3.5% after that. Other European countries are also making substantial increases. These changes have led to sharp increases in the share prices of European defence companies since early January this year.

Cohort is a group comprising seven innovative firms providing satellite, military and naval communications; advanced electronic and surveillance technology; data technology; and naval sonar systems. One of these seven is EM Solutions, an Australian developer and producer of high-end satellite-communications terminals for naval and defence customers. Australia is an increasingly important defence market, as highlighted by the recent AUKUS agreement. Cohort’s share price has risen 68% over one year, 237% over six years and 863% over 12.

BAE Systems designs and makes a broad range of defence equipment for global customers. Offerings include land, sea and air systems, with products such as combat vehicles, artillery systems, complex naval surface ships and fighter jets. The group also focuses on military electronics, intelligence and cybersecurity.

The company develops the future technologies on which new products are based and also offers a full spectrum of services from engineering to information management. One example of a future technology is the Tempest programme, which is a joint British, Italian and Japanese collaboration to develop and manufacture an advanced fighter jet independent of the US. It will incorporate a wide range of new technologies. BAE’s share price is up 32% over one year, 253% over six years and 364% over 12 years.

Rolls-Royce has three divisions. In defence, it is the market leader in military aircraft engines, naval propulsion and nuclear propulsion for submarines. When it comes to civil aerospace, it produces engines for large commercial aircraft, regional and business jets. Its power systems business includes power generation for data centres, manufacturing and utilities.

Rolls is developing small modular nuclear reactors (SMRs) to provide a low-cost, clean power source – each SMR being capable of powering a million homes for 60 years. Rolls has been selected as the supplier of sets of SMRs for the UK, the Czech Republic and the Netherlands, and is shortlisted for orders in Sweden. The share price is up 82% over one year, 131% over six years and 87% over 12 years.

Data providers

Our 12 companies include two major providers of data, RELX and London Stock Exchange Group (LSEG). RELX provides leading content and data sets with information-based analytics and decision tools to customers in 180 countries. For example, the legal profession is served by LexisNexis, which hosts over 161 billion documents and provides searches, analytics and AI capabilities. RELX is up 18.5% over one year, 123% over six years and 421% over 12 years.

LSEG comprises three major divisions. One is data and analytics, which includes trading and banking, enterprise data, and investment solutions, including indices. It makes up 63% of profits. Then there is the capital markets division, focusing on equities, foreign exchange, and fixed income. The post-trade arm covers derivatives, securities and reporting. LSEG’s shares are up 24.4% over one year, 127% over six years and 821% over 12 years.

Engineering stocks

Two engineering companies in our 12, Diploma and Halma, have grown steadily through both organic growth and successfully integrated acquisitions. Halma has a magnificent record of having raised its dividend at least 5% every year for 46 years.

Diploma has three main arms – controls, seals and life sciences – which all supply specialised products and services to sectors such as healthcare and environmental management. Offerings include industrial automation equipment, specialised cables, adhesives, fasteners and controls. The group made two acquisitions in each of 2023 and 2024. Diploma’s shares are up 8.5% over one year, 139% over six and 570% over 12 years.

Halma consists of 55 decentralised businesses operating in three segments: safety, environmental and analysis, and medical equipment. Halma buys small and medium-sized firms to secure the leading market share in a range of niche markets. It has acquired 55 companies, but also invests strongly in research and development (R&D) to ensure its products rate as the best available in their niches. Its shares are up 21% over one year, 48% over six and 433% over 12 years.

Specialised engineering and retail

Our specialised engineering businesses are Concurrent Technologies in electronics and Goodwin in mechanical and refractory engineering. Concurrent supplies the aerospace and defence, telecoms, transport, scientific and industrial sectors with high-end embedded computer products. Products are made to perform reliably in extreme conditions, such as shock, vibration and extreme temperatures/humidity. Concurrent’s shares are up 83% over one year, 99% over six years and 221% over 12 years.

Goodwin’s mechanical engineering consists of the manufacture of high technology castings, valves, antennae and pumps. Clients include the aerospace and defence, mining, oil and gas, water and power-generation industries. Goodwin Steel Castings makes specialised castings for frigates and submarines.

The refractory engineering arm makes refractory powders and processes them for the jewellery, aerospace and fire-protection industries. Four of five directors are members of the Goodwin family, and 56% of the shares are family-controlled. Goodwin’s shares are up 12.7% over one year, 129% over six and 230% over 12 years.

Next is a top-class retailer. Sales jumped 32% between 2021 and 2024. Next sells clothing, accessories, footwear and home products and operates through three main segments: Next online, Next retail and Next finance. I remember interviewing Simon Wolfson, Next’s CEO, along with other CEOs and chairmen for the UK government’s business department when I was a senior industrialist there. I was impressed by both his grasp of detail and his clear strategic thinking, and he has guided Next’s profitable growth. The shares are up 36% over one year, 108% over six years and 175% over 12 years.

How do our 12 stocks compare?

The share price growth of all 12 companies discussed above has vastly exceeded that of the FTSE 100. The FTSE grew 28.7% over 12 years, but eight of our 12 stocks grew more than 10 times as much (more than 287%). The FTSE grew 11.6% over six years, but 10 of our 12 rose over 10 times faster.

Given that the FTSE 100’s performance is modest, it is interesting to compare our 12 companies with America’s S&P 500, which has gained 4.4% over one year, 79% over six and 230% over 12 years. Over 12 years, eight of our firms beat the S&P and one equalled it. Over six years, 11 of our 12 beat the S&P and, over one year, all 12 beat the S&P 500.

Our 12 businesses are all profitable and all pay dividends. However, all invest in growth, so forward dividend yields are modest, ranging between 1% and 2%. The highest forward yield is from Games Workshop, with 2.72%.

Valuations and growth drivers

Games Workshop (LSE: GAW) is on a forward price/ earnings (p/e) ratio of 32. In the six months to 1 December, 2024 revenue rose 21% and operating profit 34%. The firm continues to grow briskly and there is still ample scope for it to exploit its intellectual property to expand its licensing income.

3i Group (LSE: III) has a forward p/e of nine. The 2024-2025 results to 31 March delivered an increased return on shareholders’ funds of 25%, while net debt was down to £771 million; gearing was 3%.

Cohort (LSE: CHRT) has a forward p/e of 25.8. The results for the half year to 31 October 2024 showed sales up 25% at £118.2 million, while the order book jumped 53% at £541 million. The May trading update reports strong revenue and profit growth.

Rolls-Royce (LSE: RR) has a forward p/e of 39. In 2024 sales grew 17% to £18.9 million and underlying operating profit rose 53%. Cash-flow growth of 88.7% enabled a £1 billion share-buyback programme for 2025. The 2025 outlook was upgraded. There are clear growth drivers for all three segments.

BAE Systems (LSE: BA) has a forward p/e of 25.8. The 2024 results show sales up 14% to £28.3 billion, underlying EBIT of £3 billion and an order book of £60.4 billion (over two years of sales).

RELX (LSE: REL) sells for 30 times forward profits. The 2024 results show sales up 14.7% to £18.9 billion, operating profit up 49.7% to £2.9 billion and net cash of £475 million.

London Stock Exchange Group (LSE: LSEG) has a forward p/e of 26 at a share price of 10,675p. The 2024 results show income up 6.1% to £8.5 billion, operating profit up 6.7% to £1.5 billion and free cash flow of £2.2 billion. The first products from the partnership with Microsoft are now reaching customers, with more planned through 2025.

Halma (LSE: HLMA) has a forward p/e of 31 at a share price of 3,206p. Halma completed seven acquisitions in the year to 31 March, has a healthy acquisition pipeline and a strong balance sheet to fund it. It delivered record 2024-2025 revenue up 11% at £2.25 billion, with EBIT up 12% at £411 million and the total dividend up 7% . This is Halma’s 22nd consecutive year of record profits. Net debt to EBITDA was reduced to 0.97 (down from 1.35 a year ago). Halma says it has made a strong start to its new financial year.

Diploma (LSE: DPLM) has a forward p/e of 27.8. The full year results to 30 September 2024 showed sales up 13.6% to £1.36 billion and operating profit up 11.3% to £207 million. The May interims showed sales up 14% with the operating margin climbing to 21.5%.

Goodwin (LSE: GDWN) has a trailing p/e of 29. Revenue for the year to 30 April 2024 was £191 million with operating profit of £26.9 million and net debt of £35.4 million. The March 2025 trading update reported that the order book had reached a record £300 million and that both the mechanical and refractory divisions are seeing strong growth, with debt cut by a further £10 million.

Concurrent (Aim: CNC) has a forward p/e of 29 at a share price of 193p. The results for 2024 show record sales up 27% at £40.3 million, pre-tax profit up 40% to £5.2 million and cash climbing 23% to £13.7 million. The company says that 2025 has started strongly in terms of both output and orders.

Next (LSE: NXT) has a forward p/e of 17. Revenue to 31 January 2025 was up 11.4% to £6.12 billion, with operating profit up 12.7% to £1.09 billion (exceeding £1 billion for the first time). Growth is driven through the Next brand, the Next online platform and product development. Next’s branded sales through its international websites have grown 350% over the last ten years and sales through third-party platforms now account for 30% of global sales.

Selecting your stocks

Given these 12 firms’ excellent growth records, it is no wonder seven of the 12 have forward p/es between 25 and 30, three over 30, one between 15 and 20, and just one, 3i Group, below 10 (9). A diversified group of five or six stocks for investment might include Games Workshop, one of the three defence companies, one of the two data companies, one or two of the four engineering companies and either Next or 3i.

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There has been a jump in takeover activity in the real-estate investment trust (Reit) sector over the past six months. Recently, Tritax Big Box Reit (LSE: BBOX) announced a £485 million takeover of Warehouse Reit (LSE: WHR), outbidding private-equity giant Blackstone. Under the terms of the deal, Warehouse’s shareholders will receive 0.4236 new Tritax shares and 47.2p in cash per share, plus upcoming Warehouse dividends due in July and October.

The deal will create a £7 billion giant and one of the largest single owners of warehouses in the UK. The deal followed what seems to be the final instalment of the battle between private-equity giant KKR and Primary Health Properties (LSE: PHP) over the latter’s peer Assura (LSE: AGR).

After months of negotiation, Assura has agreed to merge with PHP to create a £6 billion, predominantly healthcare-focused, property portfolio. Assura’s shareholders will receive 0.3865 new PHP shares and 12.5p in cash for each share, along with a special dividend of 0.84p. PHP’s offer values each Assura share at 55.0p, when including declared dividends, and values the company at roughly £1.79 billion.

These deals have been driven by necessity as Reits strive to bulk up to remain independent. The synergies achieved from any deal are usually relatively small in comparison with the values involved. Instead, Reits are seeking scale to fend off predators and reduce their cost of capital, as well as to appeal to a larger audience of investors.

Most analysts believe this trend will continue. Sub-£1 billion market capitalisation Reits are struggling to attract investors and are trading at deep discounts to net asset value (NAV). That makes it hard to raise capital and makes them appealing to private-equity buyers. For smaller, patient investors, there are currently some fantastic opportunities on the market, but these aren’t expected to last long as the sector continues to consolidate.

Picton Property: in safe hands

The £430 million Picton Property Income (LSE: PCTN) owns and actively manages a £723 million commercial-property portfolio, comprising 47 assets with roughly 350 occupiers across London and the southeast. At the end of the last financial year, its NAV was £533 million, or 100p per share, compared with the current share price of 81p. Unlike many other Reits, Picton is internally managed (rather than paying a fee to an outside third-party manager). Michael Morris is the current CEO and has held this position since 2012. He’s worked with the business since 2005 and during that time has seen multiple property cycles.

Over the past two years, like many other Reits, Picton has shifted away from office space as the post-pandemic return to the office has proved difficult. The group has rotated into industrial assets with the proceeds, as well as using cash to reduce debt.

In early 2024, the group sold its largest office asset, Angel Gate in central London, for £29.6 million, 5% ahead of the 31 December 2023 valuation of £28.1 million as a residential asset. After completion, the group’s exposure to office assets fell from 30% to 28% (it has since fallen to 25%). Office sales have totalled £51 million at an average premium to book value of 5%, although that’s off the back of several years of sub-par returns. In 2025, the value of the group’s office portfolio fell 5% on a like-for-like basis.

A shift into industry

Two-thirds of the group’s portfolio consists of industrial assets such as Parkbury industrial estate, Radlett (Picton’s largest asset), acquired in 2014, and River Way industrial estate, Harlow, acquired in 2006. In 2025, occupancy in this part of the portfolio was 99%. Demand is high for these assets because they are no longer being built.

Industrial parks are an integral part of the UK logistics network, but it takes years to push them through the planning system. As a result, demand is outpacing supply and is expected to continue to do so for the foreseeable future.

Across the company’s portfolio, it was able to push through rent rises of between 8% and nearly 40% last year, in situations where leases were coming up for renewal. Picton has projected an estimated rental value (ERV) for the industrial portfolio at roughly 15% above current levels. Management expects to push through further rent rises as contracts come up for renewal.

Picton Property’s quality portfolio

Picton’s capital allocation strategy differs from many of its peers. Typically, a Reit must distribute at least 90% of its property income and profits to shareholders each year to retain its tax benefits, which usually leaves little money for other purposes. Picton has adopted a conservative approach that still meets this target. Its dividend cover has averaged 113% over the past three years.

It has used the remaining cash as well as income from property sales for debt repayments, select acquisitions and share buybacks. Last year, £11.8 million was invested in the portfolio to boost occupiers’ amenities and environmental credentials, while £0.5 million was spent on an industrial property close to an existing asset. Gearing was cut to 24%, with the remaining borrowing maturing in 2031 and 2032, with fixed interest rates averaging 3.7% (compared with the equivalent yield of 6.8% in the property portfolio). Picton has also announced a £17.5 million share buyback – a sensible capital allocation choice with the shares trading at such a deep discount to NAV.

Since 2020, UK Reits have had to navigate a challenging environment, but recent deals show deep-pocketed investors now see value in this downtrodden segment of the market. With its 4.7% yield, low level of gearing, a quality portfolio set for growth, and a discount to NAV, Picton is one of the better plays in the sector.

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Camellia (Aim: CAM) is an unusual business, often flying under the radar as a throwback to a bygone age. This British holding company, incorporated in 1889, once boasted a sprawling empire. Now, it’s streamlining into a focused agricultural player with a clear strategy, substantial cash reserves, and still trading below its book value. For investors willing to embrace its quirks, Camellia offers a rare opportunity: a modernising business with a robust balance sheet, actively working to close the gap between its market price and intrinsic worth.

Camellia has a storied past

Camellia has a history that stretches back to the Victorian era and the British Empire. But much of its greatest expansion occurred between the 1960s and 1980s when it grew into the world’s largest private producer of teas. Today, it employs more than 78,000 people across its global estates that produce a variety of agricultural products. Tea accounts for roughly 80% of group turnover, complemented by other crops, such as avocados and blueberries.

Beyond agriculture, Camellia’s past was eclectic, encompassing private banking, a Bermuda-based insurance company, small engineering companies and an extensive collection of fine art, manuscripts and stamps. Its former headquarters, Linton Park in Kent, bears little resemblance to a corporate office, having once been a stately home, which has been on the market since 2022. This sprawling, diversified portfolio diluted focus, and management struggled to translate its assets into shareholder value. By the early 2020s, the share price was languishing, trading around 4,000p, well below its book value, which included both cash and tangible assets.

Camellia's global footprint

Camellia’s tea operations are vast and geographically diverse, reflecting its long history in the industry. It owns some of the world’s most iconic tea estates, spanning more than 34,000 hectares of mature tea plantations. Its operations are spread across two continents. In India, its estates produce both whole leaf and CTC black teas and include renowned Darjeeling gardens such as Castleton, Margaret’s Hope and Badamtam. Neighbouring Bangladesh is another key tea-producing region for the group. In Africa, the firm has a large presence in Kenya and Malawi. This global spread helps mitigate regional risks, such as adverse weather and political instability.

Camellia's modern overhaul

In recent years, Camellia has embarked on a determined modernisation programme, formalised in its “value enhancement plan” (VEP). The company is shedding non-core assets to focus on sustainable agriculture. This transformation began with the disposal of its art and stamp collections. It moved to a regular business park to offload its property portfolio, including Linton Park.

The most significant divestment was the agreement to sell its 37% stake in insurance group BF&M for $100 million (£75 million), strengthening the balance sheet significantly. These moves have left Camellia with net cash and liquid investments exceeding £100 million. The aim is to improve operating results, reduce risk through diversification and invest in agricultural growth opportunities.

Despite these efforts, Camellia’s share price remains stubbornly low, trading at a fraction of its book value. This discount is partly because of broader challenges in the Aim market and the company’s complex structure – the Camellia Foundation charity, for example, is the majority shareholder, which previously owned 52% of the common equity.

Yet management is committed to closing this valuation gap. The VEP is specifically designed to generate value and sustainable profitability, including a restarted dividend and a return of £18.9 million to shareholders by acquiring up to 350,000 shares at £54 per share. The Camellia Foundation did not tender any of its shares and consequently has seen its ownership of the business rise to almost 60%, entrenching the minority status of the remaining shareholders.

Risks and rewards

Camellia faces inherent risks. The tea market is volatile, swayed by weather, labour issues and global supply chains. A 2020 lawsuit alleging human rights abuses by its Kakuzi division, settled for £4.6 million, highlighted emerging-market reputational risks. Currency fluctuations and political instability in Bangladesh and Malawi also pose challenges. Furthermore, its unusual ownership structure, tied to the Camellia Foundation, raises questions about governance.

However, these risks are arguably priced into the current valuation. The VEP actively aims to mitigate operational and climate-related challenges. With a considerable cash position and management executing a formal value-creation plan, Camellia offers a compelling risk-reward profile. This cash pile provides flexibility for investments in high-margin crops and efficiency projects (such as solar and mechanisation), alongside direct shareholder returns. The decentralised model fosters resilience, allowing subsidiaries to adapt swiftly to local challenges.

Camellia is a rare opportunity for patient investors. Management’s explicit commitment to narrowing the valuation gap, combined with exposure to growing markets for tea and speciality crops, makes it an intriguing prospect. Camellia promises outsized returns as its modernisation strategy bears fruit.

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FRP Advisory Group (Aim: FRP) is a leading advisory company specialising in restructuring and insolvency services across the UK, with a market share of 12%. Over the past decade, it has expanded and doubled down on its position, increasing its share of the market threefold from 4% at the beginning of the 2010s. The firm has grown despite a relatively benign backdrop for insolvencies and restructurings. According to the Insolvency Service, the number of corporate insolvencies reached a high of 24,000 in 2009 (across England and Wales) before declining to 14,500 a year in 2015, 2016 and 2017, before rising slightly to 17,000 in 2019 and then falling again to a multi-decade low of 12,300 in 2020.

In the years between 2009 and 2019, struggling businesses were supported by low interest rates and modest economic growth, but all that changed in 2022. Government-backed schemes to support businesses helped stave off a complete collapse in activity during the pandemic. But as the schemes were withdrawn and interest rates rose, the number of firms falling into distress also climbed. From a low of 12,631, the number of insolvencies in England and Wales more than doubled to 25,164 in 2023.

FRP Advisory Group's expansion plans

FRP entered this environment in a position of strength. The company floated on the Aim junior market in March 2020, raising £20 million by placing new shares to boost its balance sheet and fund acquisitions. Since then, it has splurged on deals, with 14 completed from the time of the IPO to May 2025 and five deals completed in its 2025 financial year alone.

These deals have helped FRP expand beyond its traditional markets. For example, in May, it acquired One Advisory Group, which provides financial reporting and transaction advice, and governance services to more than 100 clients, the majority of which are listed on the London Stock Exchange. All these deals were funded with the company’s plentiful cash resources. Net cash was £33 million at the end of fiscal 2025, a little under 10% of the company’s market capitalisation.

According to Berenberg, which has analysed the company’s M&A-driven revenue expansion, these deals accounted for around half of revenue growth (20.5%) in 2022. Still, in fiscal 2023 and 2024, M&A growth was almost entirely non-existent compared with organic growth of 9.3% and 23.3% respectively. In fiscal 2025, deals accounted for about 40% of the company’s 18.7% top-line revenue growth.

Deals have been core to the company’s growth proposition, but so has the operating environment. Revenue has grown at a compound annual growth rate of 15% over the past decade, says Berenberg, as the number of corporate insolvencies rose significantly. The trend is continuing. The latest figures from the Insolvency Service suggest the number of registered company insolvencies in England and Wales rose 8% month-on-month in May 2025 and 15% year-on-year. Monthly insolvency numbers in the first five months of 2025 were higher than in 2024 and at a similar level to 2023, which saw a 30-year high in the annual number of insolvencies.

FRP Advisory Group's corporate finance arm

FRP has diversified from its core business of restructuring (although that still accounts for 70% to 80% of group revenue). Not all businesses that run into difficulties end up collapsing. Some are acquired, and some manage to agree a deal with creditors. Even here, FRP’s corporate finance business (15% to 20% of revenue) has a strong foothold in the market. It was the 19th-most-active M&A adviser in the year, being involved in 76 successful deals, averaging £20 million in deal value. This suggests FRP is firmly established in that mid-market bracket of firms that form the backbone of the UK economy.

Berenberg has pencilled in pre-deal revenue growth of 7.7% in 2026, 4% in 2027 and 4% in 2028. Earnings are expected to grow at a much faster clip. Thanks to its successful integrations, the company has sector-leading margins, with a 27% earnings before interest, tax, depreciation and amortisation (Ebitda) margin, exceeding its peer group average of 24%. As such, analysts have pencilled in Ebitda growth of 8.9% in 2026 on a margin of 27.5%. Return on capital employed (Roce), a measure of profit for every pound invested, is expected to be 34.9% on a forward basis.

Undervalued growth

These are all very impressive figures, but despite FRP’s growth, profitability and strong balance sheet, the market doesn’t seem to be interested. The stock is trading at a forward price/earnings (p/e) ratio of just 10.2, falling to 9.8 based on 2027 estimates. It also offers a forward dividend yield of 4.6%. Strip out cash, which is expected to hit £39 million at the end of 2026 (assuming the firm does not find any further deals), and the p/e falls to around nine times on a forward basis.

Based on these numbers and compared to the peer group average, Berenberg believes the stock is deeply undervalued. They’ve pencilled in a price target of 220p per share, suggesting a potential upside of around 72% from current levels, excluding the dividend yield on offer. Some caution is warranted, as restructuring is an inherently cyclical business. If interest rates fall and the government decides to take more action to stimulate business in the UK, the number of restructuring and insolvency deals will almost certainly fall. Still, FRP’s management team has demonstrated over the past five years that the company has what it takes to manage the cycle and even grow during tough periods.

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The last 50 years have been kind to investors in real terms. Everything made money: equities, bonds, property and gold. All investors had to remember was not to buy high and sell low. But that hasn’t always been the case. According to Barclays, UK equity prices were flat in inflation-adjusted terms in the 50 years to 1976. They doubled in the US, but that meant an annual gain of just 1.4%. Investors needed to reinvest their highly taxed dividends to grow their capital in real terms, but even so, the total return from UK equities for the 15 years to 1976 was zero.

Gilts fared even worse. An investor starting in 1926 had lost over 90% of their capital in real terms by 1976. Even with gross income reinvested, they had lost 75% of their money – and, of course, the reinvestment of gross income was not available to individuals. Holders of US Treasuries did better in the 50 years to 1976; they lost a mere 75% of their capital.

Anyone who squirrelled away gold started off well. The dollar value rose 70% in 1933 when Roosevelt devalued the dollar, having required all private holders of gold in the US to surrender it at the old price. The price was then fixed at $35 an ounce until 1971.

Property was a better investment. The price of the average house in the UK multiplied nearly 20-fold between 1926 and 1976 to about £12,000. But strict rent controls dating from the First World War ruled out buy-to-let for all but the most unscrupulous landlords. For British residents, investing outside the UK was academic. Strict exchange controls, introduced in 1947, made it legally impossible to buy overseas equities, bonds or property, or to own gold without paying a huge but volatile “dollar premium”.

The last 50 years have been much kinder to investors, but there have been plenty of traps for the unwary. The abolition of exchange controls in 1979, globalisation and the opening up of new markets, and novel strategies have increased the opportunity for UK investors to make fools of themselves. Information is much more readily available, but it doesn’t necessarily lead to better decisions. It’s as easy to be carried along by the herd as ever. Consider the following examples.

Investment #1: gold

The price rose from $35 an ounce to a peak of $850 in 1980, driven ever higher by the prognostications of the Aden sisters, who had relocated to Costa Rica so that their Delphic prophecies would not be interrupted by contact with the real world. The price then fell to $300 in 1999 as high real interest rates and falling inflation rendered “the barbarous relic” unattractive.

At this stage, Gordon Brown, Britain’s chancellor, decided to sell half of Britain’s gold reserves. The 395 tonnes raised $3.5bn against a current value of $46bn. Even at the time, this sale was recognised as a contrarian “buy” signal. Since then, the price has risen at a compound yearly rate of 10%.

Investment #2: Japan

The Nikkei index reached nearly 40,000 in 1989, when it represented more than half of the MSCI World Index. In a parallel property boom, land prices increased 50-fold between 1956 and 1986, reaching $139,000 per square foot in Tokyo. It was calculated that the Imperial Palace in Tokyo was worth as much as the whole of California.

The booming stock market was driven not by earnings but, it was said, by Japanese housewives and gullible foreigners. Japanese companies had very little in the way of earnings and rarely paid dividends, financing investment through the sale of warrants and convertible bonds with derisory yields. Western pundits sought to rationalise this on the basis that Japan’s economic miracle would go on forever.

The market then halved in barely two years but only reached a low in 2009, 80% below the peak. Many investors invested prematurely for a turnaround, but recoveries soon petered out. A sustained recovery started in 2012, and the Nikkei index only passed its old peak in 2024.

Investment #3: the dotcom bubble

Stock markets soared in the late 1990s on the back of the technology sector, but the media, telecoms and biotechnology industries were also caught up in the excitement. Share prices ran way ahead of earnings. As Ed Yardeni of Yardeni Research points out, the technology and communications sector came to comprise 41% of the S&P 500 in early 2000 but only 24% of earnings. Moreover, these earnings proved largely unsustainable, so by 2003 the figures had fallen to 18% and 13% respectively.

Within three years of their 2000 peaks, the S&P 500 and the FTSE 100 indices had nearly halved. The FTSE 100 didn’t reach a new peak until 2017, but the S&P 500 achieved it 10 years earlier in 2007, thanks to the rebound of the technology sector. Technology and communications now account for 43% of the S&P 500 but 38% of prospective earnings, while in the UK, the technology, media and telecommunications (TMT) sectors have never recovered.

In 2003, shares such as Amazon and Microsoft could have been bought at bargain prices, giving rise to a revisionist view that the TMT bubble was the dawn of a new age rather than a blind alley. But many of the shares that drove the market higher then have either disappeared or are a shadow of their former selves.

The list of forgotten firms from that era that were once in the FTSE 100 is long, including Freeserve, Thus, Colt Telecom, Baltimore Technologies, CMG, Psion, Kingston Communications and Bookham. ARM has since re-emerged stronger than ever, while Autonomy was controversially bought by Hewlett Packard. FTSE 100 veterans Cable & Wireless and GEC were destroyed by poor acquisitions.

Lastminute.com was founded in 1998 as an online bucket shop for unsold package holidays and hotel rooms. When it was floated in London in March 2000 by Brent Hoberman and Martha Lane Fox it was valued at £570 million, and the valuation soon peaked at £770 million. It was sold in 2014 for £76 million and lingers on.

Investment #4: Woodford Patient Capital Trust

Neil Woodford built a reputation at Invesco managing unit and investment trusts offering generous income. Investing for income became popular after the collapse of the TMT bubble. Income can either be reinvested for good long-term returns or taken out, but not both. This is not always clear in the marketing.

Chafing at the constraints put on him by Invesco, Woodford left in 2014 to found his own business. He started an equity income fund which, at its peak, managed over £10 billion and, in 2015, launched an investment trust, Patient Capital. Initially, £200 million was targeted but this was soon increased to £800 million. The so-called independent directors were associates of Woodford, and the trust was to invest not just in income-generating larger companies but also in high-risk smaller and unquoted companies, mostly technology or biotechnology related.

This was an area of the market in which he had, in the past, dabbled without success. His investment process was akin to throwing mud at the wall in the hope that some of it would stick. Such investments also made their way into the equity income fund but poor performance led to mass withdrawals and a crisis in the remaining rump of illiquid investments.

Investment #5: Global Absolute Return Strategies

The idea behind GARS, launched in the wake of the 2008 financial crisis, was to offer investors hedge fund-like performance at much lower fees and with better liquidity. The fund, managed by Standard Life, offered the prospect of returns of 5% above cash over rolling three-year periods through a multi-asset portfolio of investment and trading ideas from the supposedly clever people at Standard Life.

Good initial performance led to a flood of inflows from pension funds and other investors seeking a quiet life but with great returns. GARS peaked at £53 billion under management in 2014 but copycat funds at Aviva, Invesco and Investec (now rebranded as Ninety One) made the overall pool much larger.

With too much money chasing too few opportunities, performance soon flagged, then turned negative and investors exited. Even so-called “macro” hedge funds hit hard times. With assets down to just £1.3 billion, GARS was shut down in 2023. The idea that second-rate fund managers could make great risk-adjusted returns on huge pots of money from staring at Bloomberg screens was always idiotic.

Investment #6: bonds

The bull market in government bonds started in the inflation-ravaged late 1970s and early 1980s and lasted more than 40 years. At its peak in 2020, 10-year gilts were yielding just 0.25% and 10-year US Treasuries 0.68%, well below the inflation target rate of 2%. Merrill Lynch had calculated in 2016 that interest rates were at their lowest for 5,000 years, but Covid drove them even lower.

Bond yields followed, with the UK repaying its undated 3½% War Loan in 2015 before yields plunged further. In 2021, the Financial Times calculated that “bonds worth $15 trillion, more than a fifth of all debt issued by governments and companies around the world” were trading at negative yields. This was surely the biggest bubble of all time.

Many of the UK’s defined-benefit pension fund managers, chasing the illusion of “liability-driven investment”, were not only heavily invested in government bonds but had bought on margin (ie, borrowed to buy more) to increase their exposure. When rising inflation started to push bond yields higher, they became forced sellers, forcing yields higher still. The FT, using data from the Pension Regulator, estimated that pension funds lost £425 billion in 2022 while other estimates exceed £500 billion. No wonder they have insufficient money to invest in British businesses or infrastructure.

Normally, the managers responsible would have been fired, never allowed to work in financial services again and possibly jailed. Fortunately for them, blame for the fiasco was deflected by the political and media establishment onto the government of Liz Truss – as if gilts would still be yielding 0.25% without her ill-timed budget.

Investment #7: bitcoin

The cryptocurrency market is estimated at $3 trillion, and many believe this constitutes a massive bubble ready to implode. However, law-abiding people in law-abiding countries without exchange controls will never appreciate the attraction of cryptocurrencies. Legitimate investors are just the tip of the iceberg, accounting for less than 10% of the market.

They have done well by defying responsible advice but should beware any sign of an end to the war in Ukraine, as Russia pays its troops in bitcoin. This can be accessed anywhere in the world by survivors or next of kin, so rising prices keep them fighting. This makes bitcoin the world’s most unethical investment.

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Sometimes the best opportunities don’t come from firms in glamorous, fast-growing industries, but from well-run companies that have carved out a niche for themselves in lower-profile, but no less profitable, sectors. An example of this is food distribution, which involves making sure that food from producers, both ingredients and prepared meals, reaches wholesale customers such as restaurants, and large institutional consumers such as supermarkets and hospitals. In this industry, Sysco (NYSE: SYY) stands out from all the rest.

Since food distribution is a low-margin business, the key to success is keeping costs to an absolute minimum. Sysco’s status as the largest food-distribution company in the US, supplying nearly one in every five restaurants or commercial kitchens in the country, means that it can use economies of scale to do its work extremely efficiently. As a result, even though its operating margins are only around 3%-4%, it makes a 20% return on capital employed. The fact that the food-distribution industry rewards scale also serves as a barrier against any potential competition, helping to protect both market share and margins.

Should you invest in Sysco?

Sysco isn’t resting on its laurels. It has pursued a policy of international expansion and now operates in 90 countries. This enables it to reduce costs further when it comes to sourcing the cheapest food from around the world, and also allows it to continue growing by entering new markets. Furthermore, the company has acquired food-service companies in other countries, such as last year’s acquisition of Scottish meat and fish supplier Campbells Prime Meat. All this has made it the largest food-distribution company in countries ranging from Canada to the UK, as well as the third-largest producer in France.

Sysco has a solid growth record, with its international sales expanding by an average of 17% a year since 2021; overall earnings have jumped by around 50% since 2021. Adjusted earnings have quadrupled during the same period. Even if you use pre-Covid levels as the point of comparison, profits have still grown by a third since 2019. It has also managed to increase its dividend continuously during this period, one of the few companies in the industry to pay out money to shareholders. Despite this, it is still reasonably valued, trading at only 16.7 times estimated 2026 earnings and offering a dividend yield of 2.8%.

In spite of Sysco’s long record of growing both earnings and dividends, its share price has had a mixed record, fluctuating over the past few years. This might be about to change. The shares have built up momentum over the past few weeks as they are now trading above their 50-day and 200-day moving averages. I would therefore suggest that you go long at the current price of $78.41 at £40 per $1. In that case, I would put the stop loss at $54.41, which gives you a total downside of £960.

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The FTSE 100, the index comprising the 100 largest UK-listed companies, has hit new highs during the opening days of 2026, continuing its momentum from a strong year in 2025.

The FTSE 100 returned over 21% in 2025, its best year since 2009.

Now the index looks to have continued its momentum from last year, and has broken through the 10,000 point threshold. The FTSE 100 set its latest all-time high on 6 January when it briefly reached 10,158. On 13 January, it returned to close to these levels.

“The Footsie has been on the front foot again reaching fresh records of 10,150” early in the year, said Susannah Streeter, chief investment strategist at Wealth Club. Investors, she said, are “seeking solace in the defensive nature of listed multinationals”.

Many experts picked out UK stocks as a promising investment when considering where to invest for 2026.

All British investors, from experienced stock market experts to beginners, will keep a close eye on the index and its constituents are frequently numbered among the most popular stocks for DIY investors.

Why is the FTSE 100 at record highs?

The FTSE 100 has benefitted from geopolitical turmoil early in the new year.

“Equity markets are continuing to thrive in 2026 in the face of mounting geopolitical tension,” said Derren Nathan, head of equity research at Hargreaves Lansdown.

Some of the FTSE 100’s top stocks have been beneficiaries of that tension. European defence stocks rose following the US intervention in Venezuela, with Rolls-Royce (LON:RR.), BAE Systems (LON:BA.) and Babcock (LON:BAB) among the beneficiaries.

Positive updates from some of the index’s key constituents have also buoyed the FTSE 100 towards new highs.

These include Whitbread (LON:WTB), owner of Premier Inn, which announced improving Q3 demand as well as a less-than-feared impact from UK business rates on the morning of 13 January, and beverage giant Diageo (LON:DGE) whose plans to streamline its business by offloading some of its Chinese operations raised investors’ spirits.

Given the tariff-driven turbulence that rocked the US economy last year, many investors rotated out of US stocks. The FTSE 100 was one of the indices that benefitted, as (despite its recent gains) UK stocks are relatively undervalued.

“Perhaps momentum, US equities and tech are no longer the only game in town,” said Russ Mould, investment director at AJ Bell. “Further all-time highs could stoke further confidence and fresh interest in the still much-maligned UK equity market.”

How to invest in the FTSE 100

The FTSE 100 is worth considering for UK investors. While it is formed of the largest UK-listed companies, most of these are big and globalised – so it gives exposure to much of the global economy whilst generally sticking to companies that will be known and familiar to you.

Beginner investors looking for fund ideas could consider a tracker fund that follows the FTSE 100.

These include the Vanguard FTSE 100 UCITS ETF (LON:VUKG) or the HSBC FTSE 100 Index Fund.

Some investors prefer to use investment trusts. Active strategies aren’t necessarily the best way to invest in an index as they will incur higher fees and fund managers will, typically, have a specific strategy that aims to outperform the index, so holdings and returns won’t match the FTSE 100 in the same way that a tracker fund would.

But two investment trusts that hold large-cap UK stocks are CT UK High Income Trust (LON:CHI) and City of London Investment Trust (LON:CTY), both of which have around 77% of assets invested in FTSE 100 companies as of their latest updates.

Murray International Trust is a globally diversified investment trust aiming to deliver an attractive and growing income, alongside long-term capital growth. By investing in companies with sustainable and rising cash flows, the fund avoids overexposure to low-yielding stocks, making it a distinctive complement to more growth-focused global funds.

Recognised as a “dividend hero” by the Association of Investment Companies (AIC), Murray International has increased its dividend for 20 consecutive years. It is managed by an experienced team at Aberdeen who have worked together for over two decades and is supported by researchers posted to key developed and emerging markets, helping to uncover high-quality opportunities wherever they arise.

Global stocks banking on growth

Intesa Sanpaolo (Milan: ISP), Italy’s biggest domestic bank, offers a wide range of services across retail, corporate and investment banking; wealth management and insurance. The management has delivered strong operational efficiency, with a cost-to-income ratio of 38% in the first quarter of 2025 – among the lowest levels in Europe.

A strategic focus on higher-return, higher-growth areas, such as wealth and savings, bodes well. Management has repeatedly raised guidance and remains optimistic, with falling interest rates providing a supportive backdrop. We initiated a position in early April, taking advantage of fears of a global recession and market weakness around “Liberation Day”. The stock has since performed well, but we continue to view it as a quality compounder. Its robust capital position, moreover, supports a premium 7% dividend yield, further adding to its appeal.

Diageo (LSE: DGE) is a leading UK-based alcoholic beverages company and one of the world’s largest producers of spirits, with a portfolio of iconic brands, including Johnnie Walker, Talisker, Smirnoff, Tanqueray, Don Julio, Casamigos and Guinness. Since 2022, the company has faced multiple challenges: excessive inventory, operational mis-steps, weaker demand from consumers, the threat of rising tariffs and shifting drinking habits, all of which led to a halving of the share price following a post-Covid boom.

There has been much debate about whether these headwinds are structural or cyclical in nature, alongside scrutiny of the management team. After careful consideration, we added to the trust’s holding. While further patience may be required, we believe Diageo’s global presence, strong brand and breadth, together with its ability to innovate, will deliver long-term value.

Infosys (Mumbai: INFY) is a global IT services and consulting company with headquarters in India. It offers services such as cloud computing; AI and automation; data analytics; cybersecurity; and digital transformation across industries, including finance, healthcare, retail and manufacturing.

The share price has underperformed this year as macroeconomic uncertainty has prompted clients to delay discretionary projects. But the management team recently confirmed that the pipeline for cost-reduction programmes remains robust, and this is an area of expertise for Infosys. We see real potential in the company’s expansion into AI-related services and believe the current share price presents an attractive entry point for long-term investors.

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A five-year investment return of 25% looks miserable compared with the 71% return of the MSCI All Country World index, so why does Personal Assets Trust (LSE: PNL) have £1.6 billion of assets and trade at a negligible discount to net asset value (NAV)? The answer is that PNL – like Capital Gearing (LSE: CGT) and Ruffer Investment Company (LSE: RICA) – isn’t targeted at those who want to get rich through investment, but at those who want to stay rich.

“Our policy is to protect and increase (in that order) the value of shareholders’ funds per share over the long term” is the trust’s strapline. Risk-averse investors could certainly have done much worse over the past five years: the average return from investing in supposedly safe gilts has been -22%.

Holding government bonds alongside equities has been the standard way to smooth the performance of a portfolio. The classic ratio has been 60% equities to 40% bonds. This works well when stock and bond markets are inversely correlated – meaning that bonds generally perform strongly when equities are doing badly and vice-versa.

Yet this is no longer working well. The inverse correlation that lasted for over 30 years flipped in 2022. A classic passive 60/40 portfolio would have become increasingly volatile, while returning a comparatively modest 34%.

Holding a fund such as PNL rather than gilts would have done a far better job in smoothing performance for a much lower sacrifice of returns: a combination of 60% equities and 40% PNL would have returned 53%. That is why it is included as part of the MoneyWeek model portfolio.

Personal Assets Trust has a cautious portfolio

PNL’s positioning is cautious. The portfolio, which is run by Sebastian Lyon and Charlotte Yonge of Troy Asset Management, has just 38% in equities, mostly in blue chips.

The top five stocks (out of 17 holdings) are Unilever (4.5% of the total portfolio), Alphabet, Visa, Diageo and Microsoft.

Meanwhile, 48% of the portfolio is invested in government bonds. Of this, 24% is US inflation-linked bonds, 8% is Japanese government bonds, 9% is short-dated gilts, 4% is UK inflation-linked bonds, and 3% is short-dated US Treasuries. The focus on short-dated and inflation-linked bonds suggests that Lyon and Yonge don’t believe that the rise in bond yields has ended.

The single largest position is gold bullion (currently 10.7%), but Lyon and Yonge are not paid-up members of the-end-of-the-world-is-nigh crowd. They have taken “material gains” on their holdings in gold over the last nine months and also point out that “the strong recovery in equity markets is a reminder [of] why transposing geopolitical predictions onto financial markets is challenging”.

Personal Assets Trust: discount control

Of course, steady returns from a strategy like this can be made more volatile for investors if an investment trust’s discount to NAV fluctuates. The discount might be expected to widen when equity markets were performing well and PNL was lagging badly, but narrow when it was at least preserving value in difficult markets.

To prevent this, PNL has a rigid discount control mechanism: buying back shares when there is excess supply, and issuing them when there is excess demand. This keeps the shares trading close to net asset value. In the year to 30 April, the trust bought back 26 million shares (6.2% of those in issue at the start of the year) and issued just 0.6 million.

PNL has returned 204% in share-price terms since Troy’s appointment in 2009, which is more than double the 90% increase in the retail price index. Taking more risk has paid off for investors over the past five years, hence its returns have lagged the market. Still, PNL’s time will come again – maybe not yet, but very likely within the next five years.

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In June, Spectris, the high-tech precision measurement firm, was bid for by private-equity giant Advent International, which prompted a bidding war. In a year marked by a large number of takeovers, this one stands out. It was bought because it is a high-quality global leader that was too cheap. This is more than just another deal – it’s a profound warning for investors in Britain’s most respected companies.

For more than a decade following the 2008 financial crisis, a select group of top UK firms, including Spectris, were the darlings of the stock market. Their reliable profits and steady growth, in an era of rock-bottom interest rates, led investors to push their valuations to unsustainable heights. Since their peaks in 2021, however, this narrative has changed. Many of these once-admired firms, from industrial engineers to specialist food-ingredient makers, have seen their share prices plummet, some by more than 50%.

This dramatic shift was triggered by a fundamental change in the economic environment, with a surge in inflation and aggressively rising interest rates that provided attractive alternatives to equities. While this “repricing” was a necessary correction, the Spectris takeover highlights a new risk that these quality businesses have become not just cheap, but too cheap, making them irresistible targets for private capital.

A company’s value is derived from its expected future profits, discounted to their present worth. When interest rates were near zero, distant earnings were barely discounted, making them immensely valuable. As rates rose, the discount rate increased, drastically reducing the present value of those long-term earnings. This mechanism, combined with broader market anxieties, swiftly deflated valuations.

The very attributes that once justified sky-high prices – that is, their predictable, long-duration earnings – became liabilities when a guaranteed 5% could be earned from a government bond. The rush for the exits began, raising the question: do these fallen stars now offer a compelling opportunity for long-term investors? Or, as the Spectris deal shows, does their undervaluation invite opportunistic private buyers to take them off the public market for good, starving investors of the opportunity?

Quality stocks take a battering

The valuation crunch, when it came, was swift and brutal, with the share prices of some firms tumbling from their giddy late-2021 peaks. No company illustrates this reversal of fortune better than Spirax (LSE: SPX). For years, it has been regarded as one of the most consistent world leaders on the UK stock market, prized for its relentless growth and resilience. The source of this reputation is its critical role across an incredibly broad scope of industries; its specialist steam systems are indispensable for everything from food production and pharmaceuticals to the operation of hospitals, chemical plants and oil rigs. This diversification has made it a fortress of stability.

Yet even this industrial titan was not immune to the changing economic tide. Its shares plummeted from an all-time high of more than £172 in November 2021 to roughly £60 today, a shocking fall of more than 60%. This collapse was a clear case of valuation reset, not just a price decline. The company’s forward price-to-earnings (p/e) ratio was slashed from an eye-watering 50-times earnings to a far more sober 20. After such a dramatic de-rating, a world-class business that was once prohibitively expensive is now beginning to look like genuinely good value. This has brought the company firmly back on the radar, and for investors with a long-term view it is precisely the kind of name that now warrants serious consideration.

It was a similar story at fellow FTSE-100 constituent Halma (LSE: HLMA), a group of businesses focused on safety, health and environmental technologies. Its shares fell by nearly 40% from a peak of around £32. But unlike Spirax, the shares have regained their lustre in recent months, hitting new highs and showing that, when the market recognises the underlying value of these quality businesses, significant returns can be made. Halma represents what can happen to businesses whose qualities are clear, but the punishment was more severe for smaller companies that had captured and lost the imagination of investors. Treatt (LSE: TET), the flavour ingredients maker, which had enjoyed a truly spectacular run, saw its share price collapse by more than 80% from its peak of more than £13 in late 2021.

This was not just a case of a few isolated firms hitting trouble. It was a sector-wide, thematic collapse. The very mechanism of highly geared valuation expansion that had amplified gains on the way up went into a violent reverse. For years, investors had been rewarded for paying ever-higher prices for reliable earnings. Now, they were being punished severely for it. The tide of cheap money had gone out, and many investors who had piled in near the top were left painfully exposed.

It's about more than just interest rates

While rising interest rates were the primary catalyst for this dramatic derating, it would be a mistake to view this story through a purely macroeconomic lens. As the financial environment tightened, company-specific operational issues, previously glossed over by a buoyant market, were thrown into sharp relief. For several of these firms, the post-pandemic world brought a host of challenges that hit both sales and profit margins.

For Suffolk-based Treatt, it was a perfect storm. The price of orange oil, a key raw material, soared because of poor harvests and disease in Florida and Brazil. Simultaneously, squeezed consumers in North America began to cut back on premium beverages, a key end-market for Treatt’s natural extracts. This toxic combination of cost inflation and slowing demand led to a string of profit warnings that shattered its growth narrative and hammered its share price. Treatt now looks more like a speculative opportunity due to its small size and specific challenges, but at the current valuation could present an interesting long-term proposition for those comfortable with risk.

It wasn’t alone in facing headwinds. Victrex (LSE: VCT), a world leader in high-performance polymers used in everything from aeroplanes to spinal implants, also faltered. Its growth was hampered by a sluggish recovery in elective surgeries post-pandemic that affected its lucrative medical division. The company also faced early teething problems at its new factory in China, prompting concerns over operational issues. Once open, production also ramped up more slowly than expected, piling further pressure on profits.

Even the larger, more diversified players were not immune to this punishing environment. Renishaw (LSE: RSW), the master of precision measurement, found its fortunes tied to the cyclical spending of its customers in the electronics and semiconductor industries. As demand for smartphones and other gadgets cooled, so too did orders for Renishaw’s equipment. In recent months, the share price has declined considerably following the death of its co-founder, David McMurtry. His significant stake, combined with that of his co-founder John Deer, has created uncertainty over the long-term ownership structure. The market is wary of a potential future sale of these holdings, creating a stock “overhang” that can suppress the price regardless of the firm’s operational performance. Even the resilient Rotork (LSE: ROR), a dominant force in industrial valve actuators (devices that control the flow of liquids and gases), faced margin pressure from cost inflation and supply-chain disruptions, even as its order book remained healthy.

For Tristel (LSE: TSTL), the challenge was different and resulted in prolonged frustration for investors despite the firm’s clear strengths. This is a great British business: a leader in high-level hospital disinfectants, built on its proprietary chlorine dioxide chemistry. Its products serve a critical, non-discretionary role in infection prevention, a constant need in healthcare. For years, its quality and steady growth in core markets were never in doubt. But the valuation became overly reliant on the promise of securing US regulatory approval. When that FDA process dragged on longer than expected, even loyal shareholders grew weary. As deadlines slipped, sentiment soured and the shares stagnated, becoming divorced from the company’s solid fundamentals.

That dynamic has now shifted. Tristel finally secured FDA approval in 2024, unlocking access to the world’s largest and most profitable healthcare market. This is not incremental – in fact, it could be transformational.

Years of investment in research and development and regulatory work may now deliver a step change in growth as US expansion begins. Tristel is on the cusp of evolving from a respected UK specialist into a global force in infection prevention. The shares look attractive.

Are these quality stocks a bargain?

After three years of pain, the crucial question is whether these fallen stars represent a compelling opportunity. With valuations significantly compressed, are these high-quality businesses now available at a fair price? The investment case rests on balancing the enduring strengths of these companies against the risks of a permanently changed economic environment.

Their core appeal has not vanished. They are, for the most part, still exceptional businesses. They command dominant positions in niche, global markets, protected by high barriers to entry, such as intellectual property, long-standing customer relationships and technical know-how. This allows them to generate high returns on capital employed (ROCE) and prodigious cash flow.

Spirax’s expertise in steam, a critical component in countless industrial processes, is unparalleled. Halma’s businesses address non-discretionary, regulation-driven needs in safety and environmental monitoring. These are not fads, they are structural growth markets. Many are also plugged into unstoppable long-term trends. Whether it’s the drive for greater energy efficiency (a core market for Spirax and Rotork) or the inexorable rise of factory automation (a driver for Renishaw), these firms are on the right side of structural change.

The resilience of their business models is a key attraction. For many, a significant portion of revenue is recurring, coming from essential servicing, software subscriptions, consumables and spare parts. This aftermarket income smooths out the lumps in more cyclical new equipment sales, a core reason they earned the “quality” moniker in the first place.

And their stocks are now much cheaper. A p/e of 20-25 for a world-leading industrial business is historically reasonable, a far cry from the 40-50 times earnings seen at the peak. This provides a margin of safety that simply did not exist in 2021. An investor today is paying a sensible price for the underlying earnings power of the business, rather than an exorbitant price for the promise of ever-expanding multiples. Furthermore, many of these firms are taking action. Treatt is implementing self-help measures to improve efficiency and manage costs. And for Tristel, securing FDA approval opens up a market that could potentially double its sales over the long term. This is a tangible catalyst that could put it back on its growth trajectory.

Investors will have to be patient

However, investors should not expect a swift return to the glory days. The macroeconomic landscape has fundamentally changed. Interest rates are unlikely to return to near-zero levels any time soon. This means the powerful tailwind of ever-lower discount rates is gone. Future returns will have to be driven almost entirely by genuine earnings growth, not by the market being willing to pay more for those earnings. There is also the risk that the growth rates of the past decade were an anomaly. Globalisation, particularly the rise of China, provided a huge boost to many of these industrial firms. With geopolitical tensions rising and China’s own growth slowing, that tailwind may have turned into a headwind. The operational issues at Victrex, linked to weaker demand from China, are a clear warning sign.

Furthermore, the previous assumption that they do not have much competition deserves fresh scrutiny. The combination of Covid-induced supply-chain disruption and the premium pricing commanded by these firms may have encouraged some customers to seek out “good enough” alternatives from competitors. Any permanent erosion of market share at the edges could cap future growth and pricing power. Finally, while valuations are lower, they are not yet in deep bargain territory. These are still rightly priced as premium businesses compared with the wider UK market. An investor buying today is betting that their quality will allow them to navigate a more challenging environment and resume a path of steady, if perhaps slower, growth.

What to look for in quality stocks

So, how should an investor approach this sector? The key is to be selective and focus on the fundamental metrics that define a truly high-quality business, rather than simply buying the narrative. First, scrutinise the balance sheet. In a higher interest-rate world, debt is dangerous. Favour firms with strong net cash positions or very low levels of leverage. This provides resilience and the firepower to invest in research and development, or make bolt-on acquisitions during a downturn.

Second, focus on the free cash-flow (FCF) yield. This metric (the annual free cash flow per share divided by the share price) is a far better valuation tool than a simple p/e ratio. It shows how much real cash the business is generating for its owners. A sustainable FCF yield of 4%-5% from a growing, high-quality business is an attractive proposition for a long-term investor.

Third, look for a proven ability to innovate and maintain pricing power. Companies that consistently invest a high percentage of their sales in research and development, such as Halma and Renishaw, are creating the products that will drive future growth. Their ability to pass on price increases without losing customers is a key sign of a strong competitive moat.

Finally, consider a basket approach. Rather than trying to pick the single best company, it may be more prudent to build a small portfolio of three to five of these businesses. This diversifies company-specific risk while still providing exposure to the broader theme of a recovery in quality stocks. To me, Renishaw, Rotork, Tristel and Spirax seem well worth a look.

Funds and investment trusts that focus on UK quality growth companies can also be a good option for those seeking a ready-made, diversified portfolio. Whichever path is chosen, patience will be paramount. The re-rating of these businesses will not happen overnight. Attempting to time the bottom perfectly is a fool’s errand; the focus should be on accumulating stakes in excellent firms at sensible, long-term prices.

A new chapter for quality stocks

The story of Britain’s quality champions is a salutary tale of how even the best businesses can become poor investments when bought at the wrong price. The speculative fever of the low-rate era has definitively broken. For potential investors, this is no bad thing. The fog of multiple expansion has lifted, allowing a clearer view of the underlying fundamentals.

While the decline has been painful, it has also been healthy. It has returned valuations to the realm of sanity and reminded us that long-term returns are ultimately tethered to profits and cash flows. However, the fate of Spectris serves as a powerful illustration of the dangers this creates. As a provider of high-tech precision measurement instruments, its technology is essential for cutting-edge industries. Spectris had been undertaking a complex, multi-year consolidation. While strategically sound for the long term, this process of selling legacy businesses to acquire and focus on higher-growth areas created significant short-term uncertainty for investors. This was compounded by cyclical headwinds, including a slowdown in demand from China and a cooling in markets related to electric-vehicle battery development. The market, fixated on these immediate challenges, punished the shares, pushing down valuations to a level that failed to reflect its long-term strategic value.

This created a dangerous vulnerability, highlighting a key theme of the current market: if public investors will not pay for quality, private buyers will. The takeover bid from private-equity firm Advent International was a wake-up call to the market, demonstrating that, while public shareholders saw short-term problems, sophisticated buyers saw a world-class technology business on sale at a discount. The low valuations afflicting Britain’s quality companies do not just represent a potential opportunity for new investors; they also represent an existential threat. If the market undervalues the intrinsic quality of these firms for a pronounced period, they will inevitably be acquired and taken private, lost to public shareholders forever.

This dynamic means patient investors must now balance the opportunity for re-rating with the very real risk of a takeover bid that removes the stock from public markets. Perhaps a more fitting title for this new chapter is not one of decline, but of renewal, albeit one with a significant caveat: “Britain’s fallen stars: a second chance for quality, or a pathway to private ownership?”.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

With tariffs and trade wars and AI trouble in the tech space, the S&P 500 is down almost 10% so far this year (to 23 April). Global stock markets have also experienced heightened volatility. For some this is a time to panic. For others, a bargain buying opportunity.

When stock markets take a heavy tumble, more companies’ shares start to look cheaper, in so much as their price is lower than, say, a month ago. But comparing the share price alone is not the best way to determine a stock’s value.

With so many things outside of investors’ control, the one thing they can decide is how much they want to pay for an asset. When looking at the top stocks to buy, a few simple calculations can help you work out if a stock is expensive, just cheap, or really is good value.

Matt Britzman, senior equity analyst at wealth manager Hargreaves Lansdown, says: “Understanding whether a stock is fairly priced can seem like a daunting task, but it doesn’t have to be.

“By using a few simple valuation tools, you can gain a clearer picture of a company’s worth relative to its performance and the broader market.”

Here are three key measures Britzman says every stock investor should know – price-to-earnings (PE) ratio, price-to-earnings growth (PEG) ratio, and price-to-book (PB) ratio.

1. Price-to-earnings ratio

The P/E ratio is one of the most widely used tools to evaluate a company’s share price compared to its earnings. It tells you how much investors are willing to pay for every £1 of a company’s profit. We explain what is a P/E ratio in a separate article.

The P/E ratio can help you find out if a stock is undervalued or overvalued. You can also use a company’s P/E ratio to compare the price of its stock to those of other companies, for example in the same industry.

A lower P/E means a cheaper share – but cheap does not always represent good value, and can mean there are concerns about the company’s earnings. On the other hand, companies with high P/E ratios might look expensive. But this might point to forecasts of strong, growing earnings.

How is the P/E ratio calculated?

PE ratio = share price / earnings per share (EPS)

For example, if a company’s share price is £20 and it earned £2 per share in the last year, the PE ratio would be:

PE ratio = 20 / 2 = 10

This means investors are paying £10 for every £1 of earnings.

Why does the P/E ratio matter?

• A lower P/E might suggest a stock is undervalued or that its growth prospects are limited.
• A higher P/E can indicate the stock is expensive, investors expect strong growth in the future, or that earnings are high quality.

For example, if the average P/E for similar companies is 15 and your chosen stock trades at 10, it could mean the stock is undervalued, though you’ll want to investigate why.

Hargreaves Lansdown prefers to use an adapted version that uses expected earnings instead of past earnings, known as the forward P/E ratio.

2. Price-to-earnings growth ratio

The PEG ratio takes the P/E ratio one step further by factoring in a company’s expected growth rate. While a stock might look expensive based on its P/E, its growth prospects can sometimes justify the higher price.

How is it calculated?

PEG ratio = PE ratio / earnings growth

For example, if a company has a PE ratio of 20 but is expected to grow its earnings by 10% annually, its PEG ratio would be:

PEG ratio = 20 / 10 = 2

Why does it matter?

• A PEG ratio below one is generally seen as good value, suggesting the stock is good value relative to its growth.
• A PEG ratio above one means the stock might be overvalued relative to its growth rate.

The PEG ratio is particularly useful for growth stocks, where higher PE ratios are common. For instance, technology companies often trade at high PE levels, but their rapid growth can make them attractive investments when the PEG ratio is reasonable.

3. Price-to-book ratio

The PB ratio is another key measure that compares a company’s market value to its ‘book value’, which is essentially the net worth of its assets after liabilities.

You’ll be able to find the book value number on the balance sheet in a company's annual report. It will be called equity, shareholders' funds, or net asset value (NAV).

When you know the book value, you can divide the share price by the book value per share, for an idea of how cheap or expensive the company is. If the number you get (the P/B ratio) is less than one that means the company can be bought for less than its assets are worth, making it cheap.

We delve deeper into the details in our article: what is price/book ratio.

How is it calculated?

PB ratio = share price / book value per share

For example, if a company’s book value per share is £10 and the share trades at £15, the PB ratio would be:

PB ratio = 15 / 10 = 1.5

Why does it matter?

• A PB ratio below one could indicate the stock is undervalued, or that investors are wary about its prospects.
• A higher PB ratio could reflect strong market confidence in the company’s future growth.

The PB ratio is particularly useful for industries like banking and manufacturing, where cash and physical assets like property and equipment play a major role. However, for companies with intangible assets – like technology companies – it might be less relevant.

How to put it all together

These three measures, PE, PEG, and PB are great tools for investors because they help simplify complex financial data. By comparing these ratios across similar companies or sectors, you can identify whether a stock offers value, growth potential, or stability.

1. Start with the PE ratio for a quick sense of value.
2. Use the PEG ratio to account for growth prospects.
3. Check the PB ratio for asset heavy businesses.

Remember, no single measure tells the full story, it’s important to compare with:

• The company’s historical ratios to see how its valuation has changed over time, (Hargreaves Lansdown uses a 10-year average). You can find past financial information about a company in its accounts. For large, publicly listed companies these will often be on their website. For smaller UK companies, for example, try Companies House.
• The average valuation of competitors or the market as a whole.

Britzman says: “Investing is for the long term – that’s at least five years. You should also always consider these ratios alongside other factors like the company’s overall financial health, industry trends, and broader economic conditions.

“By combining these tools, you’ll be better equipped to make more informed, confident investment decisions.”

Remember – don’t panic!

When markets are falling, it is essential not to be guided by emotion. The history of the stock market is punctuated by upheavals – corrections are part of the normal investment process.

John Plassard, senior investment specialist at Mirabaud Group, points out: “Historically, the US stock market has suffered a correction of 5% or more almost every year (94%), and double-digit declines are also fairly common.”

The S&P 500 has historically, he adds, averaged a 10% annual return since 1928, despite experiencing an average intra-year drawdown of 16%.

In almost 60% of the years since 1928, the S&P 500 has ended the year with double-digit gains, but in almost half of those years there has also been a double-digit correction along the way.

“This historical context highlights the volatility inherent in the stock market and reminds us that downturns are part of the journey towards long-term growth,” Plassard says.

The UK has one of the most active and vibrant fintech sectors in the world, but there are not that many publicly-traded opportunities for the average investor. Most of the UK’s fintech champions are privately-, venture-capital or private-equity-backed companies with no plans to float any time soon.

LendInvest (LSE: LINV) is the rare exception. The firm was founded in 2008 to disrupt UK property lending, with an estimated addressable market of £150 billion at the time of its initial public offering (IPO) in 2021. LendInvest joined the market during the busiest year for public offerings in London since 2007. Globally, 2021 was a record year for new listings, especially for tech names, as investors piled into any company that looked like it could benefit from the disruption caused by the coronavirus pandemic. LendInvest went public in July 2021 at 186p per share for a market capitalisation of £255 million on London’s Aim market. The stock spiked to 226p in September – and then the world started to change.

In late 2021, central banks, including the Bank of England, began one of the most aggressive interest-rate hiking cycles in the history of central-bank rate-setting. As the Bank hiked rates from a record low of 0.1% in December 2021 to 3.5% by the end of 2022, and then to 5.25% by September 2023, a chill fell on the UK property market. LendInvest was hammered.

When the company told the market in October 2022 that it would not grow as expected at its IPO, the stock plunged 30% in one day. By mid-October 2022, shares in the company were changing hands for just 61p. In August 2021, investment bank Berenberg published its inaugural analyst report on the company, projecting a profit before tax of £13 million for fiscal 2022, £24 million for fiscal 2023 and £37 million by 2024. Just over a year later, Berenberg had downgraded the numbers for 2023 and 2024 to £15 million and £18 million. As it turns out, the firm missed these projections by a mile. For fiscal 2024, it reported a loss after tax of £27.3 million.

Wrong place, wrong time for LendInvest

LendInvest really entered the public domain at the wrong time. The technology underpinning the company’s investment platform, which connects lenders with borrowers, has the potential to revolutionise the UK market. However, fintech has lurched from disaster to disaster over the past five years. Some of these disasters were utterly uncontrollable, such as the dramatic shift in the lending environment in 2022. Others, such as the firm’s early reliance on individual investors to help fund mortgage lending, and a £12.1 million accounting error in 2024, could have been avoided. The strategic missteps have shaken investor confidence in the firm and its management.

Now the business has finally stabilised. The most significant shift has been the move away from the bank-like lending model to an asset-management-led, capital-light business model. LendInvest’s edge has always been its technology, which streamlines the process of underwriting and servicing mortgages, especially when it comes to specialist property lending on commercial properties or developments. Where it struggled was finding the money to lend to borrowers at economic rates of interest. But over the past year, it has inked a number of deals with major lenders to provide funding to support the loans. In January, the group reported that these funds under management – capital committed to LendInvest – reached £5.14 billion. This included £1.5 billion from US investment giant JPMorgan, £300 million from BNP, Barclays and HSBC, and £300 million from Lloyds and other institutional investors. The fact that these lenders, some of the largest in the world, have backed LendInvest is telling.

Finding the money is only half of the battle for a specialist lender such as LendInvest. The hard part is deploying the capital effectively. Figures suggest it is doing just that. In a January trading update, LendInvest said it had lent just shy of £1.2 billion in the calendar year 2024, surpassing its previous record of £1.1 billion in 2022. This was achieved without any meaningful rise in headcount. In fact, the group cut more than a quarter of its staff in 2023 to help with costs as profit plunged. Increased lending volumes, coupled with the group’s increased funds under management, are both a testament to the scalability of its tech platform.

Primed for growth

LendInvest is putting the mistakes of the past behind it. It’s still at the mercy of markets to a certain extent, but it’s better positioned now than ever before. The company moved to run-rate profitability in September last year and has continued to deploy capital. A tough lending market may even work in the company’s favour as it’ll become even more important for lenders to assess the complex needs of borrowers.

Still, there’s no denying this is a high-risk play. LendInvest has a market capitalisation of just £37 million, and it needs to execute well over the coming years to avoid the mistakes of the past. However, based on Panmure Liberum projections, the stock is trading at a forward price-to-earnings ratio (p/e) of 8.4 based on fiscal 2027 earnings projections. That’s dirt cheap and suggests the market has little confidence in the company meeting growth expectations. But if LendInvest does execute well, there’s scope for huge returns for investors. It’s also worth noting that, at £33.6 million, the company would be worth less than the money it’s spent developing the tech that underpins its lending and mortgage servicing business. That could be a good opportunity for one of its deep-pocketed partners to pick up the tech on the cheap.

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The scale of additional military spending planned across Europe over the coming years is set to deliver a windfall for the continent’s defence industry. According to research compiled by Goldman Sachs, defence spending by EU member states is expected to rise by 1.8% of GDP in 2024 to 2.4% by 2027, an extra €80 billion a year. The UK has outlined a commitment to spend 2.5% of GDP by 2027, an extra £13.4 billion a year, taking total annual spending to £80 billion by 2027.

The bulk of this will end up in the hands of the sector’s biggest players, the national champions and defence giants, such as BAE Systems, Rheinmetall, Leonardo, Safran and Thales, but a good chunk will also trickle down to the smaller players. One such business that could benefit more than any other is Chemring Group (LSE: CHG).

Chemring could benefit from a captive defence market

On the face of it, Chemring doesn’t look to be one of Europe’s most important players in the defence sector. It has two main divisions, sensors and information, which accounts for around 40% of revenue, and countermeasures and energetics, which makes up 60%. The latter contains the firm’s advanced plastic explosive business, which is one of the most important in the whole European defence sector.

Chemring only has one major competitor in advanced plastic explosives in Europe, France’s Eurenco Group, which is owned by the French state. It’s difficult to ship explosives around the world, so governments like to buy from local suppliers. With the European market dominated by just two players, that doesn’t give the rearming European nations much choice.

Sales are already benefiting from increased demand from European nations. With Ukraine firing around 10,000 shells a day, resupplying the country with explosives has become a priority for the country’s military backers. Chemring noted it had recorded “unparalleled demand for our specialist capabilities” in its full-year results for the year to the end of October, as it recorded a £932 million order backlog, up 24% year-on-year and roughly equivalent to more than three years of revenue.

In response to the increased demand (which is almost certain to continue), the company has outlined plans to invest £200 million to expand manufacturing capacities in Norway, the US and the UK. On top of this, the firm has been awarded a £90 million grant to support investment in its Norwegian site.

Unfortunately, while the countermeasures and energetics side of the business is doing well, the group’s sensors and information division struggled last year. A shift in order patterns translated into a 30% decline in order intake and a 37% decline in the division’s order book, even as revenue increased 14% to £213 million. But Roke, the leading business in sensors and information, is a key player in electronic warfare, and this is being noticed. Russia’s invasion of Ukraine and Hamas’s attack on Israel have both highlighted the increasing role of technology on the battlefield.

Last year Roke booked orders from customers in Sweden, Lithuania, Latvia, the United Arab Emirates and Japan – the latter its first in the East Asia region. So, while the division might have encountered some turbulence last year, it’s well positioned to grow in the new era of defence spending.

Chemring's shares look cheap

Considering its position in the market, it’s no surprise that Chemring has attracted takeover interest. Earlier this year it was rumoured that US private-equity giant Bain Capital was looking at offering 390p a share for the group, although no hard offer emerged.

In reality, it could be difficult for a private equity company that’s not based in Europe to take control, considering the national-security implications and the pivotal role the group plays in European defence. Still, the rumoured bid price does give a rough indication of what the business could be worth.

As the private-equity playbook often involves breaking up businesses and selling the component parts to the highest bidder, Panmure Liberum has crunched the numbers for each of Chemring’s four main business divisions to calculate the enterprise’s valuation on a sum-of-the-parts basis. Based on projected 2029 revenue (multi-year order backlogs make these figures relatively reliable), the broker put a value of £810 million on Roke as it’s set to have the second-largest revenue (£304 million) behind the Energetics business in 2029. Energetics could be worth as much as £680 million based on the projected 2029 revenue of £334 million, with companies such as BAE and Eurenco most likely to make an offer. The remainder of the enterprise could be worth around £250 million, according to the broker. Overall, on a sum-of-the-parts basis, Panmure Liberum has put the value of Chemring at 747p per share, more than double the current share price.

This underscores the value of the business, but it’s also worth touching on some of the issues that have held back growth at the company. The biggest of these is a legacy US government contract for the supply of countermeasures, signed in 2016 and extended into 2025. The contract has produced virtually no profit for the group. Last year, it also encountered production issues “due to adverse weather conditions”, and there were delays in its plans to expand automation. Both of these issues hit margins at a time when the company should have been celebrating the shifting winds in the defence sector.

If it can put these issues behind it and successfully ramp up production to meet growing demand, Chemring could be one of the best ways to play the European rearmament trade – assuming it’s not bought out before shareholders can reap the full benefits.

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Grand Theft Auto 6 (GTA 6) is set to launch on 26 May 2026 - and not autumn 2025 as originally anticipated, Take Two Interactive Software (NASDAQ: TTwo) has confirmed.

In its earnings report back in February, the company said it was hoping to launch in autumn 2025, but with no date set until now, a delay to May 2026 comes as no surprise.

The real last bit of marketing was back in December 2023 when the GTA 6 trailer was launched - but trailer 2 (see below) is now in place with the exact launch date confirmed.

GTA has been in the making for over a decade and dubbed to be the biggest launch in the the entertainment industry - but what does this mean for the gaming industry and can investors take advantage of the anticipated growth?

GTA 6 has been over 10 years in the making. It will be one of the biggest entertainment launches in history, with some experts saying it could even take over the likes of Netflix, TikTok and YouTube for entertainment.

Riding off the back of the success of GTA 5, which has sold 210 million units, GTA 6 is expected to rake in billions for TTwo, the American company behind GTA publisher Rockstar Games.

In its earnings call in February, TTwo said GTA's membership continues to grow 10% year on year. GTA 6 is expected to escalate this.

Gaming stocks have disappeared off the radar when it comes to the most popular stocks with the industry hitting a bit of a slump after its pandemic growth subsided.

But, there are expectations that the release of GTA 6 could change TTwo’s (NASDAQ:TTWO) fortune and cause a ripple effect for other gaming publishers.

After all, gamers have waited over a decade for the release of GTA 6, which will come with more capabilities, realism and use of artificial intelligence. Investors have already been keeping a close eye on AI stocks, such as Nvidia, which have been powering gaming technology.

GTA 6 is expected to fetch $1 billion in pre-orders alone and over $3 billion in the first 12 months of launching, according to analysts at DFC Intelligence.

It is expected its launch will benefit the gaming industry in general, putting gaming stocks back on the agenda.

TTwo - is it a good bet for investors?

TTwo’s stock has already climbed 45% in the last 12 months on the expectation that GTA will take gaming and digital entertainment to a whole new level.

Sam North, market analyst at eToro, told MoneyWeek: “For over a decade, gamers have been eagerly awaiting the next chapter in one of the biggest entertainment franchises of all time, Grand Theft Auto 6.

“However, TTwo is under immense pressure to deliver. While last quarter’s revenue beat estimates, it still marked a year-on-year decline, and analysts expect only modest 3.8% revenue growth this quarter. At the same time, development costs are rising, and the broader gaming sector is facing headwinds, including declining consumer spending and increasing scrutiny over monetisation strategies.”

TTwo develops and publishes games mostly through Rockstar Games, 2K and Zynga.

“Despite TTwo’s strong track record, its reliance on major franchises like GTA and Red Dead Redemption creates risks. If GTA 6 fails to meet sky-high expectations, investor enthusiasm could quickly fade. The company's near $13 billion acquisition of Zynga was meant to diversify revenue streams, but results have been mixed so far. Meanwhile, TTwo’s all-time high stock price from 2020 looms large, leaving little room for new investors seeking upside,” said North.

The bear view at Morningstar is that: “Take Two lives and dies with Grand Theft Auto 6” - and if GTA 6 disappoints, “the stock will likely get crushed and the ability to invest in the future will be hindered”.

The bulls on the other hand believe GTA 6 will “ride the popularity of the 200 million-plus copies of GTA 5”. It is also likely to hugely profit from sales made via in-game purchasing.

What impact could GTA have on the gaming stocks?

With the excitement building up for GTA 6 , something would have to go terribly wrong for it to not take off.

But if it is successful, other gaming stocks could benefit from its success. GTA 6 is expected to retail at around £82, and this higher price could see other gaming publishers boost their prices, too. It could also trigger a rise in digital entertainment generally.

“There’s no denying the cultural and financial impact GTA 6 could have. If the launch goes smoothly, it may not only lift TTwo but also provide a much-needed boost to the gaming sector, which has struggled since its 2020 peak,” North said.

“Investors will also be watching Roblox’s earnings, which report before the open, as a potential barometer for broader gaming industry trends. Additionally, Electronic Arts recently missed revenue expectations with a 20.4% year-on-year decline, highlighting the challenges facing major publishers. With sentiment already running hot, any misstep could send TTwo shares tumbling—but if Take-Two delivers, it could cement its place as the dominant force in gaming once again.

“For what it's worth, analysts see a 10% upside on the stock, with a mean price target of $202 which would take us back up to its previous all-time highs. Can it make it there? Investors will hope so. Game on.”

The FTSE 100, the UK’s flagship stock market index, made a strong start to 2026 but has stuttered in recent months following the outbreak of the war in Iran.

The index’s constituents feature consistently among the top stocks for retail investors, with household names like Rolls-Royce (LON:RR.) and Legal & General (LON:LGEN) topping the list of shares bought by investment platform Interactive Investor’s customers during April.

The FTSE 100 hit all-time highs early this year, breaking the 10,000 barrier for the first time on 2 January and peaking at just below 10,935 on 27 February.

That date, not coincidentally, marked the last trading day before the outbreak of the war in Iran. Since then, the FTSE 100 has fallen 3.9% (as of market close on 27 May), with the conflict perceived as a headwind to both the UK economy and its flagship index.

Figures released on 25 May by the British Chambers of Commerce (BCC), a trade body representing British businesses, showed that 80% of UK firms it surveyed reported an existing or expected impact from the Iran conflict.

“Higher energy bills, shipping disruption and the rising cost of raw materials are daily concerns for business,” said William Bain, head of trade policy at the BCC.

“Even if the current ceasefire soon signals the end of the conflict, the economic reverberations will be felt for many months to come,” he added.

It should be noted, though, that the UK economy and the FTSE 100 are not the same thing. FTSE 100 stocks are typically large, multinational companies whose revenue is derived mostly from overseas. As such the index’s performance isn’t necessarily correlated with that of the UK economy.

In fact, some of the largest FTSE 100 stocks are oil and gas majors that have profited from rising oil prices since the war’s outbreak.

So what are the top stocks in the FTSE 100, and should you consider investing?

The top FTSE 100 stocks by market cap

In terms of market capitalisation (market cap), these are the biggest stocks in the FTSE 100 as of 28 May:

^{Source: London Stock Exchange}

At present, HSBC (LON:HSBA) is the largest stock in the FTSE 100, followed by pharmaceuticals giant AstraZeneca (LON:AZN).

The top-performing FTSE 100 stocks of 2025

Last year the FTSE 100 gained 21%, its best year since 2009 (the recovery following the global financial crisis), when it returned 22%.

Here are the top-performing FTSE 100 stocks of 2025:

^{Source: LSEG}

Fresnillo (LON:FRES), the world’s largest silver miner, led the FTSE 100 as its share price increased more than fivefold during the year, benefitting from a 147% increase in the price of silver. Endeavour Mining (LON:EDV) and Antofagasta (LON:ANTO) also cashed in on an excellent year for precious metals.

Defence stocks like Rolls-Royce and Babcock International (LON:BAB) also made the top 10 list, alongside resurgent financial stocks like Standard Chartered (LON:STAN), Prudential (LON:PRU) and Lloyds (LON:LLOY).

Should you invest in the FTSE 100?

While UK share price gains don’t always match the explosive rates of their American counterparts, FTSE 100 shares can be a good source of dividends and close the gap in terms of total returns.

“Fundamentally, the FTSE 100 can help provide ballast to an ISA or pension portfolio, particularly as the index has a rich source of dividends and a good mix of cyclical and defensive companies,” says Dan Coatsworth, investment analyst at AJ Bell.

“Holding UK equities alongside the US, emerging markets, Europe and others may be the best way to capture emerging winners, reduce your investment risk, and benefit from global megatrends,” says James McManus, chief investment officer at J.P. Morgan Personal Investing (formerly Nutmeg).

One easy way to invest in the FTSE 100 is buying a tracker fund such as the Vanguard FTSE 100 UCITS ETF (LON:VUKE).

Aviva and Direct Line Group have agreed a sweetened cash, shares and dividends deal that will see Aviva acquire its rival and capture more than a fifth of the combined UK motor insurance market.

FTSE 100 constituent Aviva (LON:AV) had previously attempted to acquire Direct Line Group (LON:DLG) for 250p in November, but Direct Line’s board dismissed this offer out of hand, describing it as “highly opportunistic”, according to the FT.

The latest offer, consisting of 129.7p in cash, 0.2867 Aviva shares and a 5p dividend for every Direct Line share, was accepted quickly though. The two companies issued a joint statement confirming the agreement in principle this morning (6 December).

“Aviva had no choice but to dig deeper if it wanted to secure Direct Line,” said Dan Coatsworth, investment analyst at AJ Bell. “Lo and behold, the offer has been raised to a much more realistic level to get the deal done.”

The deal is worth approximately 275p to Direct Line shareholders, based on Aviva’s share price before the start of the offer period, and therefore equates to a 73% premium compared to Direct Line’s share price at that time.

Direct Line shares opened 6 December at 252.2p, 6.86% above their close price the previous session, and jumped a further 2.22% to 257.8p later in the morning before falling back to around their opening price.

Why is Aviva buying Direct Line?

In effect, Aviva is taking advantage of a rival enduring a tough patch, and moving decisively to capitalise on it.

“Let’s not sugarcoat it: Direct Line has hit some serious potholes lately”, said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “Market share has been sliding, underwriting hasn’t exactly been flawless, and regulators have been knocking on the door.”

Direct Line’s share price had fallen 9.9% in the year up until Aviva’s first bid on 27 November.

“For Aviva, the price is pushing the limit of good value but snapping up Direct Line could be a strategic jackpot,” says Britzman.

The deal will see the combined entity control more than 20% of the motor insurance market, as well as offering Aviva the opportunity to guide Direct Line’s ongoing business transformation and realise efficiency gains from the new entity’s scale.

“Aviva has performed every step of the takeover dance flawlessly,” says Coatsworth. “It’s spotted a rival going through a weak phase and thrown its hat into the ring as an interested buyer.”

Should you buy Direct Line shares?

Direct Line shares are currently trading at approximately 252p, notably below the implied value of Aviva’s offer. So, is there an easy payday in store for anyone who buys Direct Line shares now?

Not necessarily. The first point to remember is that both parties have only reached an agreement in principle. Nothing is confirmed whatsoever as yet; Aviva has until Christmas Day to confirm that it wants to make a firm offer in line with the agreement.

“There was speculation overnight that Aviva had quietly proposed 261p versus the 250p previous offer,” says Coatsworth. “If true, perhaps the indicative response to 261p was negative so Aviva might have raised the price to 275p and felt rushed into going public on the proposal without having all the paperwork finalised to make a formal bid.”

Direct Line Group shareholders will then vote on the deal. While this is also likely to go through, given that the board has indicated that it will recommend to shareholders that they accept the offer and the premium it implies on Direct Line’s prior valuation, it is another point of potential uncertainty.

Will the CMA block Aviva’s Direct Line takeover?

Besides the two companies following through on the deal, there are other factors that could scupper it. For example, given the substantial share of the motor insurance market the combined entity would control, it is possible that the Competition and Markets Authority (CMA) could block the takeover.

“The competition watchdog will almost certainly look at the deal as the enlarged group would account for a large chunk of the motor insurance sector,” Coatsworth told MoneyWeek.

Direct Line’s share price has already gained substantially since Aviva’s interest in a takeover became known, and as such, its shares are implicitly overvalued compared to its business performance at present, despite still trading below the 275p level the offer implies.

Should the deal fall through for any reason, Direct Line’s share price would likely fall back significantly, and investors who bought at current prices expecting a quick payout will be left carrying the bag.

“There is an arbitrage opportunity with Direct Line’s shares given they are trading below the new proposed offer from Aviva,” says Coatsworth. “But any investors considering jumping in now must understand the risks to the deal.”

Food giant Nestlé has been left “counting the cost” of pushing up prices of its most popular brands beyond the reach of “increasingly squeezed customers”, says Sian Bradley in The Times. It has been forced to cut its sales guidance again.

Underlying sales increased by an unexpectedly weak 2% in the first nine months of this year, which means that it now expects sales to rise by only 2% over the full year, “the lowest rate since the turn of the century”. Experts have blamed the malaise on Nestlé’s decision “not to ease up quickly enough on price increases” as inflation has cooled, as many of its competitors did.

Nestlé’s poor numbers explain why former CEO Mark Schneider was ousted in August, says Aimee Donnellan for Breakingviews. It’s not just the poor sales figures. The company’s profitability “is also under pressure”, with margins weakening. While this could be fixed by a “hefty spend on sales and marketing”, possibly funded by selling some of its 20% stake in the beauty giant L’Oréal, the company also faces the medium- and long-term challenge that its portfolio “is full of foods that may go out of fashion” amid growing concern over rising rates of obesity.

How are Nestlé shares performing?

The “tumbling targets” follow trouble with IT last year and an “uncomfortable regulatory investigation” in France over allegations related to the purification of bottled mineral water, says Miles Costello in The Telegraph. As a result, Nestlé’s shares are down 14% in a year and close to their cheapest valuation in 10 years, at 18.4 times forward earnings.

But the group still has some “distinct competitive advantages”, including the “distribution clout created by its scale”, buying power with suppliers, and “diverse household-name brands that underpin pricing power”. Even concerns about health need to be seen in the context of the firm’s “increasing emphasis on health and nutrition”. The “ingredients exist for success”.

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A “boy-who-cried-wolf mindset” has set in on energy markets, says Matt Egan for CNN. Traders, caught out by previous false alarms, have become increasingly “numb to the cascade of crises” afflicting the world – a growing war in the Middle East is thus not causing the oil market the panic you might expect. “Pre-shale revolution, this type of situation would have sent prices well above $100” a barrel, says Helima Croft of RBC Capital Markets. Still, as Bob McNally of Rapidan Energy Group puts it, “the story of the village boy who cried wolf did not end well – for the village or the boy”. While markets aren’t yet panicking, they are feeling nervous following comments from Joe Biden that Israel discussed striking Iranian oil facilities in retaliation for last week’s missile attack. 

Brent crude prices topped $80 a barrel recently for the first time since August, before easing back mid-week, say Rafe Uddin and Jamie Smyth in the Financial Times. Oil rose 8% last week for its biggest weekly gain since the start of last year, and has climbed almost a fifth since hitting a year-to-date low last month. Iran accounts for roughly 2% of global crude exports, or two million barrels per day (mbpd), says Anthony Harrup in The Wall Street Journal. 

A six-month halt to that supply could see Brent “temporarily rise to a peak of $90”, assuming other oil producers step in to fill some of the shortfall, say Goldman Sachs analysts. In the short-term, markets will need to put more “risk premium” on oil – the extra paid to cover the risk of supply disruptions, says David Oxley of Capital Economics in a note. “Depending on how things pan out, this “could conceivably” be in the order of “another $20 a barrel to oil prices”.

Why is there a high supply of oil? 

One reason for the market’s relative calm is that there is plenty of extra oil sloshing around, says The Economist. The Opec+ grouping of producers is collectively sitting on more than five mbpd in unused production capacity, which it has been withholding to prop up prices. That is “more than enough to make up” for any eventual loss of Iranian crude. But the situation is fragile. A regional conflagration could see Iran close the Strait of Hormuz, the shipping lane through which 30% of the world’s seaborne crude oil flows. That could send prices surging toward triple digits. For all the excitable talk, Opec quietly abandoned its quest for $100 a barrel oil in June, says Javier Blas on Bloomberg. 

In view of global oversupply heading into next year, “given a binary choice between $100 and $50 for next year, I’d take the latter bet”. As a rule of thumb, a 5% rise in oil prices adds approximately 0.1% to inflation in advanced economies, says Roger Bootle in The Telegraph. That is much less than during the 1970s energy crises, when Western economies were more “oil intensive” than they are today. These price rises, therefore, don’t yet represent a major inflationary risk. Indeed, given weak global oil demand and rising supply, “over the next year the likelihood is that oil prices will soften”.

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Gold price hit another record high on16 October, passing £2,060 an ounce, driving investors towards the yellow metal.

In particular, investors have been cashing in on gold they hold to take advantage of high prices, but are also stashing up on gold coins to take advantage of tax-saving opportunities.

Latest data from The Royal Mint shows a surge in demand for gold coins with a record quarter of bullion coin sales on its website - revenues increased 110% in the third quarter, July to September 2024.

Investors have also capitalised on record prices by selling bullion bars and DigiGold back to The Royal Mint, which resulted in revenues going up 86% and 91% respectively.

Ongoing geopolitical uncertainty, global volatility and falling interest rates contributed to gold prices rising in the third quarter, with the gold price in sterling now up 20% this year so far (as of 30 September). 

Investing in gold is often a popular, especially at times of uncertainty. Recent price rises saw gold bullion sales from The Royal Mint rising 63% year-on-year.

Why are gold bullion coins popular?

Bullion coins produced by The Royal Mint are classed as capital gains tax free investments and provide a tax-efficient way to invest in precious metals.

While Labour has said it does not plan to raise income tax, VAT or National Insurance, this has led to speculation that CGT could be in the firing line, hitting investor returns.

This has not only led to investors topping up their tax free allowances with ISAs and Sipps, but has also driven investors to tax efficient investments like gold coins. 

“UK investors are increasingly favouring CGT-exempt products, such as bullion coins. Sales of CGT-exempt bullion coins on The Royal Mint’s website have surged to a record high in the third quarter, with revenues up 110% compared to the same period last year. This has primarily been driven by a significant uplift in gold bullion coin sales. Between July and September 2024, revenues from silver and gold coin sales rose by 42% and 118% respectively, when compared to the same period in 2023. By contrast, sales of bullion bars, which are subject to Capital Gains Tax (CGT), have fallen, dropping by 11% year-on-year,” The Royal Mint stated.

Research from The Royal Mint also found that 44% of UK investors were considering investing in CGT-exempt bullion coins to boost wealth and reduce their tax bill.

Stuart O’Reilly, market insights manager at The Royal Mint said: “Gold prices have had multiple tailwinds in recent months. We have seen interest rates start to reverse course both sides of the Atlantic. Economic uncertainty and heightened geopolitical risk is leading to competition for safe haven assets. This is driving broadly positive market sentiment, fuelling both demand for precious metals, and activity from those looking to realise capital gains.

“Beneath the surface, the type of assets investors prefer is changing. While gold and silver can help investors strengthen and diversify their portfolio, our record quarter for bullion coin sales reflects the renewed focus on tax efficient investing. Our data suggests that investors are increasingly keen to protect their future investment gains, favouring CGT-exempt investments such as bullion coins over products that are subject to CGT. It’s also interesting to see more investors actively using The Royal Mint’s Buy Back Service, reflecting a proactive approach to closely monitoring the market and making strategic portfolio adjustments."

The gold-silver ratio has long been considered an important metric to gauge the best time to invest in precious metals.

If you monitor gold, you’ll know that the yellow metal is usually seen as a stable investment. The gold price had a glittering start to 2025, with investors flocking to the metal as a hedge against inflation.

Central banks are also buying up the commodity due to its diverse use in various industries like nanotechnology and cancer therapy.

Silver is traditionally more of a volatile investment, however, the ‘devil’s metal’ gained 21.5% last year and is up around 12% so far in 2025, leaving some investors wondering if now is a good time to invest in silver.

Whether you are new to precious metal investing or want to diversify your portfolio, it’s useful to know the relative value of silver against gold.

It can affect investor sentiment, help understand economic trends, offer a hedge against inflation, and influence your investment strategy.

What is the gold-silver ratio?

The gold-silver ratio compares the price of gold to the price of silver. Essentially, it tells you how many ounces of silver are needed to buy one ounce of gold and it is calculated by dividing the current market price of one ounce of gold by that of one ounce of silver.

The gold-silver ratio is the oldest tracked exchange rate that is still in use, and it is a guidepost for investment decisions, be it inflation, deflation, market crashes, and broader economic trends.

At the time of writing, gold was priced at £2,342.66 per ounce, and silver at £25.53 per ounce, so the gold-silver ratio was 92:1, according to UK bullion dealer Chards. Therefore, gold is currently 92 times more expensive than silver.

The higher the ratio, the more expensive gold is relative to silver. While there’s no definitive benchmark for the ratio, assessing the current gold-silver ratio against its average in recent years can be one factor that investors can use when making an assessment on when to buy or to swap holdings of either metal. Divide the current ratio by the average and you can calculate whether one metal looks too expensive or the other too cheap, based on average performance.

All-time gold-silver ratio

History of the gold-silver ratio

Gold and silver have been precious metals for a long time, and many may be surprised to know that the gold-silver ratio has been measured ever since ancient Roman times. The gold-silver ratio has evolved significantly over the centuries, due to changes in economic conditions, market dynamics and geopolitical events.

Long ago, the ratio between the two metals was set by governments and empires to control currency and coinage. The earliest record available dates back to around 3200 BCE, when ancient Egypt recorded a ratio as low as 2.5:1. The Roman civilisation was one of the earliest to set the ratio, which started at around 8:1, and over the decades, was bumped up to 12:1.

Since then, the value of gold has only risen, as the difficulty of mining and production of the two metals, notably gold, increased its scarcity value.

By the 18th century, most countries had moved away from using silver as common coinage and switched to gold alone. The US government's Coinage Act of 1792, which confirmed the dollar as the US standard currency unit also fixed the gold-silver ratio at 15:1. This ultimately resulted in gold being valued over silver, making the yellow metal more expensive, and causing gold coins to be hoarded and/or exported. The ratio was later adjusted to 16:1 in 1834.

By the 20th century, the ratio had already begun reaching dramatic heights of around 40 ounces of silver for one of gold, and even peaked at nearly 100:1 with the advent of World War II.

If the gold-silver ratio was still based on the availability of the natural supply of the metals it would stand at 15:1– estimates suggest there is roughly 15 times more silver in the Earth’s crust than gold.

But gold has been seen for years as a store of value, a hedge against inflation and the gap between gold and silver is ever mounting.

In April 2020, the gold-silver ratio reached a record 125:1, as a response to the onset of the Covid pandemic. Today, the ratio has dropped from those heights and is now sitting around 92 ounces of silver to one ounce of gold.

Related content

• Is now a good time to invest in gold?
• The mystery of America’s gold and why an audit matters
• How to buy gold bullion
• How to profit from the scramble for metals and minerals

War, peace, or something more chaotic? Oil prices have been volatile, with Brent crude spiking to $114 a barrel on Monday on reports of shooting between the US and Iran in the Strait of Hormuz, only to drop below $103 on Wednesday after secretary of state Marco Rubio announced that the US-Israeli offensive against Iran is over.

Markets are pessimistic that the strait will be unblocked any time soon. Two weeks ago, online prediction markets gave 90% odds that traffic would be back to normal by the end of June, says John Authers on Bloomberg. That figure has now fallen to even odds. Similarly, Brent crude futures are pricing in $90 a barrel for the end of the year, the highest since the conflict started.

Why did UAE quit Opec?

Oil markets won’t normalise before the end of the year at the earliest, says Stephen Innes of SPI Asset Management. But on a longer view, news of the departure of the United Arab Emirates (UAE) from the Organization of the Petroleum Exporting Countries (Opec) suggests that we may be heading for “a more competitive, more liquid, and ultimately lower-priced oil market”. The UAE’s exit is a significant blow to the 65-year-old oil cartel, which coordinates to restrict supply and manage prices.

The Iran war has deepened the split between Saudi Arabia and the UAE, major Opec players and the Gulf’s two leading powers, says The Economist. The Emiratis have chafed under Saudi-led restrictions that forced them to keep 600,000 barrels per day of spare production capacity in the ground, a figure that was rising before the war thanks to new infrastructure investment.

The UAE now wants to raise output to fund post-war reconstruction. Abu Dhabi requires a significantly lower oil price ($50 a barrel) for its national budget to balance compared to Riyadh ($90), making it inclined to pump even when prices are low.

The Emiratis calculate that, with the world transitioning away from fossil fuels, it is better to monetise its oil reserves now rather than risk leaving them in the ground, says Kathryn Porter in The Telegraph. Opec was already losing its grip on oil, with non-members such as the US, Canada, Brazil and Norway collectively accounting for more than half of global supply.

However, Opec’s collective action doesn’t just keep prices high, it also helps stabilise volatile energy markets. With that “coordinating mechanism” weakening, oil prices are likely to “overshoot in both directions” in the future.

Cartels always sow the seeds of their own destruction, says John Kemp in the Financial Times. High prices incentivise new supply from members outside the group. That raises pressure on cartel members to keep supply even tighter, opening internal “fissures”. “Every cartel eventually ends in failure” and “Opec is likely to prove no different”.

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Shares in Entain, the gambling group behind Ladbrokes and Sportingbet, rose by 5% this week following an encouraging update, says Dominic Walsh in The Times. Entain said that there had been “positive momentum at the start of the second half, with the pace of growth continuing in the third quarter”. Online UK and Ireland operations benefited from an acceleration in the rebound of gaming and sports betting, with volumes and margins improving. 

The international and central and Eastern Europe markets also did well. All this provides a “comfortable start” for new CEO Gavin Isaacs. The trading update has definitely “put a rocket” underneath Entain’s share price, helping to restore the market’s confidence in the company’s “ability to bounce back after a patchy few years”, says AJ Bell’s Russ Mould. Recent problems include a bribery investigation and allegations that it overpaid for acquisitions that have disappointed. 

The stock slid by 75% between September 2021 and August 2024. This, in turn, has led to the company being “circled by activist investors hoping to push through change and score an easy win”. As a result, so much bad news has been priced into Entain’s valuation that even “the smallest bit of positivity” has prompted a rally.

Will Entain's luck continue?

Both the recent news and the latest rally in its share price, suggest that Entain seems to be “overcoming recent challenges”, says Derren Nathan for Hargreaves Lansdown. There are also “some attractive growth prospects to go for”, including the “relatively immature but potentially huge market for online betting and gaming” in the US, in addition to Brazil. 

Note, however, that regulatory changes remain a risk “and not something that can always be predicted”, while unfavourable sporting results “can also cause financial results to disappoint, regardless of strategic progress and economic conditions”.

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Burberry has been dumped out of the FTSE 100 index of Britain's biggest listed companies after 15 years in the top flight. 

The historic British brand, which is known for its check print and trench coats, appears to have fallen out of fashion after its share price slumped by almost half over the past six months. It has been replaced by insurer Hiscox, which has seen its share price rise by a fifth over the past year.

The FTSE 100 index is reshuffled four times a year, enabling top-performing companies to enter, while laggards slip out into the lower tier FTSE 250.

FTSE Russell, the global index provider, said: “In the rebalance, Burberry Group will leave the FTSE 100 and enter the FTSE 250.

“The rules-driven, impartial quarterly reviews ensure the indexes continue to portray an accurate reflection of the market they represent.”

Burberry has felt the impact of a slowdown in the wider luxury sector, with demand from shoppers dented during the cost-of-living crisis. It ousted its chief executive Jonathan Akeroyd after just over two years in July and axed dividend payouts following a sales slump. Akeroyd was replaced as CEO by industry veteran Joshua Schulman, who was previously the boss of American fashion brands Michael Kors and Coach.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "Turning things around from here is a tough task for the new chief executive, Joshua Schulman.

"His experience at brands such as Michael Kors, Coach, and Jimmy Choo should help Burberry build back up its brand desirability, but this is likely going to take considerable investment and patience."

Raspberry Pi promoted to the FTSE 250 

At the same time the reshuffle has seen Raspberry Pi, the British microcomputer maker, enter the FTSE 250 only three months after listing.

The IPO was cited as a victory for the London market, which has suffered from a number of UK-listed firms being bought out or moving abroad.

Paddy Power-owner Flutter, for example, has shifted its main stock market listing to New York, while German-owned Tui signed off a plan to delist from London in February. 

Before Raspberry Pi’s IPO, London’s stock market has struggled to attract interest from high-growth technology firms, which have shown a preference to list in New York. Indeed, the London Stock Exchange lost out to the US last year when UK chip maker Arm Holdings chose Wall Street over London for its stock market return.

Eben Upton, chief executive of Raspberry Pi, said at the time: "The quality of the interactions during the marketing process has underlined our belief that London has the right calibre and sophistication of investor to support growing, ambitious technology businesses such as Raspberry Pi."

Shares in Reckitt Benckiser have slumped by 9% to a 10-year low after a US court ruling that a baby formula produced by rival Abbott Laboratories had caused a little girl to develop fatal necrotising enterocolitis (NEC), a bowel disease, says Jack Simpson in the Guardian. The verdict, which saw Abbott ordered to pay $495 million (£385 million) in damages, follows similar judgments against both companies over their formulae for premature babies. With Reckitt due to face its own NEC-related trial in September, investors are “waiting to see whether the company will be subject to further payouts”. 

The lawsuits amount to little more than a “shakedown” against both firms and their “life-sustaining formula for pre-term infants”, which only makes them a few million a year in sales, says The Wall Street Journal. Experts think the causes of NEC are “unclear”, with recent trials showing “that the formulas and fortifiers don’t increase the incidence of NEC”. But both companies may be forced “to pull their products from the market”. This in turn could have “consequences for the health of premature infants”, with Abbott’s CEO already warning of a “public health crisis” if the verdict is allowed to stand.

What this means for Reckitt

The verdict is “close to a worst-case scenario” for Reckitt, says Alistair Osborne in The Times. Note that “litigious” US lawyers have already “lined up another thousand cases”, picking jurisdictions where juries are said to be “particularly amenable to big awards”. Reckitt’s liability has been estimated at between £400 million and £8 billion. This also makes its “belated” plans, which it outlined last week, to sell off infant-formula maker Mead Johnson, which Reckitt bought for $16.6 billion in a “howler” of a deal, “even more fanciful”. 

The prospect of additional delays to any sale of Mead is a pity because management’s overall plans for streamlining the company are “eminently sensible”, says Lex in the Financial Times. As well as selling the baby formula division, it will get rid of the “low-growth home-care products”, including Cillit Bang and Air Wick Air Fresheners, which comprised around 30% of Reckitt’s £14.6 billion of sales last year. It should therefore be able to keep its “power brands” – across health, hygiene and home – in a “higher-growth, higher-margin business” with £10.3 billion of sales. If these plans are thwarted then it “will face renewed calls for a more radical overhaul”. 

Even if the legal problems surrounding the baby formula are resolved, restructuring Reckitt may take a long time, says Karen Kwok on Breakingviews. The home-care assets “won’t be sold until the end of next year”. What’s more, Reckitt’s board “hasn’t said whether it will return the money to shareholders or invest in the business”. Inflation is also making it harder to pass on costs to consumers. No wonder, then, that investors were “not convinced” by Reckitt’s plans even before the latest setback.

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Deliveroo’s share price jumped on Wednesday on the back of reports that US rival Doordash held takeover talks with the British delivery company.

Doordash flagged an interest in a takeover of Deliveroo last month, but talks ended because the two sides could not agree on the value of the deal, according to Reuters.

The news agency said San Francisco-based Doordash made the approach but the talks ended after disagreement on valuation. There are no talks ongoing, Reuters added.

Deliveroo’s shares rose as much as 6% to 135 pence on Wednesday morning following the news. CEO Will Shu founded Deliveroo in February 2013, alongside his childhood friend Greg Orlowski.

 Further takeover talks may come 

Analysts at the financial services company Jefferies said: “In this instance, the talks have failed. But such is the strength of the financial, industrial and strategic logic of a Deliveroo takeover, we would not be surprised to see similar headlines to re-emerge in the short term.

“In our view, the key to unlocking a recommended offer from Deliveroo is understanding the sensibilities of the founder CEO, Will Shu. This may only be the start.”

The takeaways and grocery delivery group is on track to make its first ever profit, after seeing its annual pre-tax losses tumble from £230.6 million to just £10.9 million in 2023. Deliveroo has yet to make a profit since it was founded 11 years ago.

Its first few years were challenging, but the pandemic changed everything. With most restaurants forced to close, stuck-at-home consumers had no choice but to order their meals through platforms like Deliveroo, Uber and Just Eat Takeaway.com.

Deliveroo’s motto is 'proper food, proper delivery’, but it has been diversifying into other markets to increase options for users.

A user in London opening the app today can order a range of products including fresh bread, alcohol, toiletries, condiments, pet food and even tobacco products, all to be delivered within 20 minutes. The firm is continually increasing the number of options on the platform in London and other regions.

Trouble is, the business is bleeding cash in the form of marketing costs. It is battling its main rivals, Uber Eats and Just Eat for market share, and the fight for eyeballs shows no sign of calming.

What is more, Deliveroo and its peers rely heavily on “gig economy” labour. Pressure is only set to keep growing on them to increase pay and benefits for their workers. The firm is already having to work hard to retain and attract new riders in a tight labour market, only adding pressure to its finances.

Doordash, which has a $46 billion market value, had previously considered buying Deliveroo in 2022, the Sunday Times reported.

The price of gold has fallen below $4,000 for the first time since 6 November 2025 as the prospect of higher US interest rates rises.

Gold prices fell 11.7% during June, dipping below $4,000 in the process.

Gold has sold off this year as inflation has risen, exacerbated by the conflict in the Middle East, prompting some to question whether gold still acts as an inflation hedge.

While gold is typically viewed as a safe haven during times of crisis, its gains during 2025 made gold holdings an obvious asset for liquidity-hit investors to sell once the conflict in Iran broke out at the end of February.

“Gold is often considered to be a haven in troubled times, but what many people don’t realise is that its price can still drop in a falling market,” said Dan Coatsworth, head of markets at AJ Bell. “Investors often sell what they can in the face of trouble, and gold is a liquid asset.”

But the selloff didn’t start or end with the conflict in Iran. Its price has continued to fall even as the war appears to be drawing to a conclusion.

“Recently, gold has become increasingly sensitive to the same oil-price and inflation dynamics affecting broader markets, meaning its behaviour may be more correlated with other assets than investors have come to expect,” Matt Bance, solutions strategist and portfolio manager at investment manager T. Rowe Price, told MoneyWeek.

What is currently weighing on the gold price, and where might it go from here?

Why is the gold price falling?

Several factors led to the price of gold falling after the US/Israeli war with Iran broke out, besides the aforementioned liquidity rush that set in at the start of the conflict.

Gold is priced in dollars, and had therefore been benefitting from a weaker dollar prior to the outbreak of the war.

Greater inflationary expectations also reduced the chances of central banks cutting interest rates. Hawkish central bank policy, particularly in the US, is typically negative for gold prices because higher rates increase the appeal of bonds compared to gold, which pays no income.

Either side of the war there has been much focus on the policy outlook of the Federal Reserve’s (Fed) new chair, Kevin Warsh.

Warsh is regarded as more hawkish (favouring relatively higher interest rates) than other contenders for the position. Gold prices fell immediately following his announcement as Trump’s pick for the post in January, and with US CPI inflation rising to 4.2% in May markets are expecting the Federal Open Market Committee (FOMC) (the Fed’s committee that sets interest rates – equivalent to the Bank of England’s Monetary Policy Committee) to slow or even reverse its prior cadence of rate cuts.

Rate-setters balance the need to hike interest rates in order to curb inflation against the risk that doing so will balance economic growth. But US economic data paints a picture of a strong economy: on 30 June, the US Bureau of Labor Statistics revealed that US job openings increased by 9,000 in May, strengthening the hawkish argument for relatively higher interest rates.

“A run of resilient US economic data has cemented expectations that the Federal Reserve still has scope to raise interest rates,” said Susannah Streeter, chief investment analyst at wealth manager Wealth Club. “Stronger jobs data and stubborn inflation have reinforced the view that rates are likely to stay higher for longer, pushing up Treasury yields and the dollar, while taking some of the shine off gold.”

Should you buy gold?

A more hawkish Fed means that the short term outlook for gold isn’t particularly positive, and there are other reasons to believe that gold prices could fall further before they start to rise again.

“A significant portion of the structural bull case is now reflected in prices,” said T. Rowe Price’s Bance. “Central bank demand moderated in the first quarter of 2026, while exchange-traded fund (ETF) demand has also softened.”

As its declines this year have shown, gold has a lot of risk attached to it considering many consider it a defensive asset.

“Gold may glitter as a safe haven during periods of heightened uncertainty, but it's far from immune to volatility,” said Wealth Club’s Streeter. “The precious metal tends to bask in demand when nerves are on edge, but its fortunes can quickly tarnish when expectations for interest rates change, which they have recently.”

Despite this many experts, Bance included, think there is still an argument for holding gold given its long-term diversification potential.

“While market dynamics reduce some of gold’s diversification appeal in the near term, we continue to believe gold deserves a place in diversified portfolios,” he said. “Gold provides diversification against inflation surprises, fiscal deterioration, reserve currency uncertainty, and broader confidence shocks. Those risks remain relevant, which is why we continue to favour maintaining a strategic allocation.”

How to gain exposure to gold prices

If you are considering where to invest and want to add some gold exposure, there are three main approaches.

The first one is investing in the metal itself through a financial contract, such as an ETF or exchange-traded commodity (ETC).

See our article on the best gold ETFs for more information.

You can also get indirect exposure by investing in the miners that dig gold out of the ground. This can be done by investing directly in their shares, or by buying a gold fund or investment trust.

Lastly, you can buy physical gold bars or gold coins.

In terms of how much gold to hold in a portfolio, Tom Stevenson, investment director at Fidelity International, suggests around 5-10% – which is about the same as you might hold in cash.

“The two offer insurance and dry powder to complement the growth and stability of the shares and bonds that make up the bulk of a balanced portfolio,” he said.

The FTSE 100 gained 2.2% during December 2025, delivering on the seasonal promise of a Santa rally.

The gains helped the index break through a new milestone on the first trading day of 2026.

The Santa rally left the FTSE 100 at 9,982 at the end of 2025. It took just hours of trading for the index to pass the 10,000 mark on the morning of 2 January 2026 for the first time in its history.

Rebecca Maclean, investment director at Aberdeen Investments, hailed the milestone as a strong start to the year for the UK’s flagship index.

“It follows a strong 2025, when the UK market delivered a 22% gain, led by its largest companies. An impressive return for a region many investors continue to overlook,” Maclean added.

UK chancellor Rachel Reeves called the index’s new milestone “a vote of confidence in Britain’s economy and a strong start to 2026”.

The S&P 500 didn’t participate in the Santa rally last year, closing December 2025 just 0.05% above where it ended November.

This echoes a year that saw diversification in the stock market, with the top stocks of the year reflecting a move away from US dominance.

“Last year saw global equity leadership broaden, with almost every major market outpacing the US, as investors diversified their exposure,” said Maclean.

What is the ‘Santa rally’?

The term ‘Santa rally’ refers to the tendency of stock markets to rise as the festive season kicks in and consumer spending rises. This also sees optimistic investors pile more into the top stocks and funds.

The FTSE 100 has returned 2.1% on average during December since 1984, making it the index’s best-performing month of the year. April and July are the only other months of the year with an average gain above 1% during that period.

“If you want to know why markets talk about the Santa Rally, that is why – because the numbers back it up,” said Russ Mould, investment director at AJ Bell.

How often do we see a Santa rally?

The data shows that stock markets do tend to rise during December. Analysis from Fidelity International shows that the FTSE 100 posted a positive return in December in 24 of the last 30 years, while the S&P 500 rose in 22 of the last 30 Decembers.

Why that happens is less clear. Jemma Slingo, pensions and investment specialist at Fidelity International, attributes the existence of Santa rallies to positive sentiment among investors at this time of year.

“Optimism tends to build as the year draws to a close and investors look ahead with a sense of renewal in the new year,” she said. “Festive optimism, Christmas bonuses and thinner trading volumes are often cited as contributing factors.”

Mould points out that in the past, investors looked forward to a ‘January effect’, wherein financial advisers would put their clients’ money to work in the new year and lift the stock market.

While this no longer happens, Mould thinks that the Santa rally effect may have originated with investors attempting to anticipate the January effect in advance.

While the Santa rally effect can make December a buoyant month for the stock market, Mould cautions that it often precedes a weaker year ahead.

“The FTSE 100 has served up 11 annual losses since 1984 and 10 of those came after a gain in the December of the previous year,” he said. “The only exception was 2015, whose 4.9% annual decline came after a 2.3% slide in December 2014.”

Some of the biggest historical Santa rallies have preceded sharp market downturns, such as the shock Federal Reserve rate hike in 1994 that followed a buoyant December 1993.

Last year (2024) was one of the rare cheerless Decembers for the FTSE 100, which fell 1.4% during the month. But the index’s gains this year underscores the point that a dismal Decembers doesn’t necessarily mean an unhappy new year.

In a separate article, we also take a look at where to invest for 2026.

Should you bank on a Santa rally?

Santa rallies are frequent occurrences, but like any seasonal investing trend, such as the ‘sell in May’ approach, they shouldn’t be relied upon too heavily.

“Seasonal patterns like the Santa rally are no substitute for a long-term investment plan, but they do offer an insight into how investor psychology can drive markets,” says Slingo. “Even in times of uncertainty – whether it’s financial crises, referendums or pandemics – December has often rewarded those who stayed invested rather than trying to time the market,” she added.

“History shows that investors who stay the course tend to be rewarded over time,” said Slingo. “The festive season can bring volatility and opportunity in equal measure, but discipline and perspective remain the best gifts investors can give themselves.”

The UK equity market is one of the most attractive markets in the world for income investors - and right now the market looks cheap. Investment trusts are a great way to capitalise on the market’s income credentials while outsourcing portfolio management to an expert. 

MoneyWeek deputy digital editor Rupert Hargreaves talks to Simon Gergel, portfolio manager at the UK-focused Merchants Trust, with 95% of assets invested in UK equities and the remainder in Europe. 

Last year the trust was one of the few to beat the market, with the value of its assets rising 10.5% for the 12 months to the end of November, compared to a return of 6.5% for its benchmark, the FTSE All Share Index. Over the six months to the end of April, the trust’s net asset value has increased by 14.1% compared to 12.5% for its benchmark. 

Today the trust trades at a slight premium to NAV and yields just under 5%.

MoneyWeek videos are designed to help our viewers become better investors. They're aimed at beginners and more experienced investors. 

In some videos, we explain investment concepts in an easy-to-understand way. In others, we focus on topical investment stories and themes. Either way, the emphasis is on clarity and brevity. 

We don't want to waste your time with a 20-minute video that could easily be so much shorter. 

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If you’ve been keeping a close eye on share tips 2026, then don’t miss this regular round-up of the top stocks to consider for your portfolio.

The MoneyWeek share tips 2026 guide pulls together some of the most popular stocks from top share tipsters around.

As well as the UK financial pages, we look at publications across the pond for investors who want to diversify their holdings internationally.

Investors will undoubtedly want to refresh their finances this year – we look at dividend heroes, what's happening with gold prices and the best way to invest. If you're new to investing, here's how to start.

This list is updated regularly.

Share tips 2026: top stock picks of the week

Five stocks to buy

1. XPS Pensions (LSE: XPS)
Investors' Chronicle
Pensions adviser XPS Pensions has reported a fourth consecutive year of double-digit revenue growth, thanks to a favourable pensions-transfer market and defined-benefit schemes shifting to a surplus amid higher interest rates. XPS' advisory division posted a 20% rise in revenues to £150 million, with upcoming regulations expected to boost growth further. The insurance division is growing too. Robust demand could bolster sales and profits in the coming years, and XPS expects stable margins this year. 311p

2. Babcock International (LSE: BAB)
Investors’ Chronicle
The aerospace and defence firm has delivered a 19% increase in full-year operating profits to £433 million. Free cash flow of £262 million supported a hike in the final dividend and a £200 million buyback. Earnings per share are expected to grow from 64.2p to 71.5p by 2028. Despite the risks inherent in certain projects and uncertainties over UK military spending plans, Babcock is on track to meet medium-term profit guidance, while sales in the group's nuclear division rose 14%. With the shares 30% below the consensus target, “we remain buyers”. 941p

3. General Motors (NYSE: GM)
Barron's
General Motors is a “cash machine”. It's generated $53 billion in free cash flow since 2021 despite a volatile economy. Even with lower car sales recently and setbacks in the electric-vehicle (EV) division, GM offers a free cash flow yield of 14%. The group is collaborating with defence contractor Lockheed Martin and aims to apply its unused EV battery capacity in utilities to support the AI-data-centre building boom. Further buybacks are expected. $78

4. Medtronic (NYSE: MDT)
Barron's
Medtronic is “deeply undervalued” and a good bet despite a reputation for underwhelming investors. The US medical-device company's fourth-quarter results eclipsed expectations, with revenue rising nearly 10% to $9.7 billion. Analysts think the stock could reach $120 in 12 months, with higher dividends on the cards. Its cardiovascular segment, which accounts for 39% of sales, saw a 10% increase in revenue and its neuroscience unit is growing. Its AI-driven surgical platform shows promise. Medtronic has spun off the diabetes unit and has made acquisitions. It expects organic revenue and adjusted earnings growth and higher dividends. Buy ($81).

5. AO World (LSE: AO)
Investors' Chronicle
AO World has announced record yearly profits and a £10 million special dividend. The electronics retailer's sales grew 11.4% to £1.27 billion, driven by its core retail operations and gains in market share. Profit improved after it used automation and offshoring to manage costs, including a robotics trial in warehouses. Free cash flow more than doubled to £66.4 million due to stronger trading. AO's 8% free cash flow yield and cash generation are “attractive”. Buy (92p).

One stock to sell

1. Wizz Air (LSE: WIZZ)
Investors' Chronicle
Wizz Air has reported 8% growth in annual sales to €5.7 billion. It carried a record 69.7 million passengers last year. Despite warnings of a potential €50 million impact from the Iran conflict, effective fuel hedges minimised losses, and increased cash reserves lowered debt. However, the oil shock is likely to have further ramifications, as Wizz's financial year only ended in March and the airline has not provided profit guidance for the upcoming year due to uncertainties related to the Strait of Hormuz. Leverage is high, and there could be further capacity constraints and unfavourable conditions for fuel negotiations. Sell. 1,202p

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The share prices of FTSE 100 retailers Tesco and Sainsbury’s have surged higher over recent months.

Indeed, they have gained 13% and 16%, respectively, since the start of the year. This is significantly higher than the wider index’s return of 5% over the same period.

Of course, with a cost-of-living crisis in full swing amid rapidly rising interest rates, their near-term outlook remains relatively uncertain.

However, their low valuations and sound strategies suggest they offer attractive long-term investment prospects.

The potential impact of a cost-of-living crisis on FTSE 100 retailers

With annual inflation currently standing at over 10% and average earnings in the UK rising by around 6% per year, consumers’ disposable incomes are coming under sustained pressure.

In tandem, rapid interest rate rises that are being implemented by the Bank of England in an attempt to reduce inflation are contributing to a worsening near-term economic outlook. Indeed, the UK economy only narrowly avoided a recession in the second half of last year.

As a result, consumer confidence has reached record lows over recent months. This is likely to negatively impact the prospects for FTSE 100 retailers such as Sainsbury’s and Tesco as consumers become increasingly price-conscious.

While previously they may have valued quality and service alongside competitive prices when purchasing groceries, clothing and other items, they may now focus to a greater extent, or even solely, on price when deciding where to shop and what to buy.

This could lead to reduced sales and, in particular, squeezed margins across the retail sector as consumers become more willing to trade down to cheaper substitutes, postpone spending on certain items, or even avoid specific products that they now deem to be unnecessary.

From an investment perspective, falling sales or reduced profitability is unlikely to be conducive to a rising share price for either Tesco or Sainsbury’s.

Why Tesco’s share price offers good value for money

Despite Tesco’s recent share price rise, the FTSE 100 retailer continues to trade on a low valuation.

It has a price-to-earnings ratio (p/e) of just 11.8 and a price-to-sales ratio (p/s) of only 0.3. This suggests that investors have fully priced in a tough near-term outlook for the firm as it contends with weak consumer confidence amid a cost-of-living crisis.

Moreover, the company is in a strong position relative to other retailers to overcome, and even capitalise on, current downbeat sector trends.

Notably, it has relatively high levels of customer loyalty which could mean it is less affected than sector peers by an increasingly price-conscious consumer. Over 20 million households in the UK have a Tesco Clubcard which may mean they are relatively sticky, and less likely to shop at a cheaper rival such as Aldi or Lidl.

In addition, Tesco is on track to deliver £500m in cost savings in the current financial year. By the end of next year, it expects to generate around £1bn in cumulative savings as part of a major efficiency programme. This will help it to maintain current margins at a time when high inflation is causing many FTSE 100 retailers to report rising costs and squeezed profitability.

The company’s dominant online position does not appear to be fully reflected in its current share price. It has a 36% share of the online grocery market which is likely to catalyse its financial and investment performance as a rising proportion of UK consumers pivot to online channels when purchasing their groceries and other products.

Why Sainsbury’s share price can deliver FTSE 100-beating performance

While the near-term outlook for Sainsbury’s share price is likely to remain precarious given the challenges facing consumers, it nevertheless has the potential to outperform the FTSE 100 over the long run.

Crucially, it continues to offer a wide margin of safety even after its recent share price rise. The retailer currently trades on a p/s ratio of just 0.2 and has a p/e ratio of around 10.2. Both figures indicate that its shares remain undervalued even though the company faces an uncertain near-term outlook due to weak consumer sentiment.

Sainsbury’s is still in the midst of a major reorganisation as it seeks to successfully integrate different parts of its business, such as Argos and Habitat, into its supply chain.

It now expects to generate over £1.3bn in cost savings in the three years to 2024, with around £730m of savings having already been delivered. Reducing operating costs at the same time as many other FTSE 100 retailers are experiencing rising costs due to high inflation could provide Sainsbury’s with a clear competitive advantage.

Indeed, it is allowing the firm to reinvest £500m in pricing over a two-year period that should allow it to expand market share, as it did in the most recent quarter, while rivals without such financial flexibility struggle to keep prices low.

A growing market share could allow Sainsbury’s to capitalise to a greater extent on an eventual UK economic and consumer recovery, thereby catalysing its long-term share price performance.

Are these FTSE 100 retailers worth buying?

The scale of recent share price gains posted by Sainsbury’s and Tesco are unlikely to be repeated over the short run.

While both companies are well placed to overcome the cost-of-living crisis and weak economic outlook, investor sentiment is likely to remain downbeat regarding the sector's prospects over the coming months.

However, their ambitious cost savings programmes could provide clear competitive advantages and market share gains that translate into higher sales and profitability. Meanwhile, both stocks trade on low valuations that provide scope for significant upside over the coming years.

Therefore, while both stocks are likely to experience elevated levels of volatility in the short run as the cost-of-living crisis and an uncertain economic outlook play out, now appears to be an opportune moment to purchase them while they offer excellent value for money.

The FTSE 100 closed at another record high today at just over 8,010.

While other stock markets around the world have been struggling recently, the FTSE 100 has been charging ahead due to its heavy weighting towards resource stocks.

The weak pound has also helped boost sentiment towards the index. More than two-thirds of the index’s profits are earned outside the UK, meaning their earnings are worth more when translated back into sterling after the currency’s recent weakness.

According to Jason Hollands, managing director of Bestinvest, the record is due a combination of "today’s better-than-expected inflation figures aided by a weakening of the pound versus the dollar, as the highly international companies in the FTSE 100 have significant dollar earnings exposure so the currency conversion effect benefits them. In fact, FTSE 100 stocks earn more of their revenues in the US, than they do in the UK."

BP helps the FTSE 100 hit a record

A strong performance from oil and gas companies, as well as mining stocks, has helped drive the index higher over the past few weeks.

Last week, BP announced a record profit, following Shell, which also announced record profits the week before.

Another strong performer has been the global mining and commodity trading powerhouse Glencore. Shares in this business have returned nearly 20% over the past year.

And on the day the FTSE 100 hit a new record, the mining giant and commodity trader unveiled a record $34bn in profits for 2022.

More than half of those earnings came from its coal-mining business. EBITDA at Glencore's coal arm more than tippled year-on-year.

By far and away the best-performing stock over the past year is the defence contractor BAE Systems. Excluding dividends, investors the stock has returned 44% over the past 12 months. Including dividends, the stock has returned around 50%.

“The FTSE 100 has long been criticised for its lack of technology giants. However, in 2022 this proved to be a positive, allowing the UK index to avoid the ‘tech wreck’. Its favourable sectoral mix of energy giants and banks helped the FTSE 100 outperform in 2022,” says Scholar

Does this mean it’s time to buy the FTSE 100?

The FTSE 100 index is a global index, and, as such, is not necessarily an indicator of UK economic performance.

That could mean it’s a good investment for those seeking to broaden their international exposure at a time when the outlook for the UK economy isn’t too bright.

What's more, despite its recent high, the index still appears cheap.

“Despite the new high for the index, UK equities remain incredibly cheap with the FTSE 100 trading at a multiple of 10.7 times forecast earnings. This is low both compared to longer-term trend and it is also one of the widest discounts to the rest of the world in living memory. This is a good starting point, indicating the potential for further gains, while UK shares also provide an attractive level of dividend yield at circa 4.0%," says Hollands.

“In recent years, many investors have dismissed UK blue chip shares as ‘boring’, lacking exposure to exciting sectors like technology and social media. But in a more trying economic environment, solid companies churning out reliable dividends are well worth considering. Boring is the new sexy. With an abundance of exposure to energy, commodities, consumer staples and healthcare companies, the FTSE 100 looks well placed for the current environment.”

The long road to 8,000

It has taken the FTSE 100 index eight years to rise 1,000 points from 7,000 to 8,000, but “this is nothing compared to the time taken to climb from 6,000 to 7,000” notes Laith Khalaf, head of investment analysis at AJ Bell.

It took 17 years for the index to close this gap, a gain of 16.7%. In comparison, it took just seven months for the index to rise 20% from 5,000 to 6,000, which it hit in April 1998.

“It’s fair to say this period also skews the figures somewhat, but it’s also important to note that each subsequent 1,000 point advance marks a progressively less impressive price appreciation for the index,” says Khalaf.

“The first 1,000 point climb from 1,000 to 2,000 required a doubling in the price of the index. The move from 7,000 to 8,000 represents a jump in the FTSE 100 of just 14.3%, which translates into a compound capital return of just 1.7% a year for the last eight years. Not a slap in the face when you consider that doesn’t include dividends, but hardly a stellar performance either.”

However, including dividends, the index has produced a far better performance for investors.

The FTSE 100: the income index

The headline FTSE 100 figure doesn’t include dividends, which, considering the fact that dividends play such an important part of the UK market, is misleading.

“While this doesn’t affect the FTSE 100 too much over shorter time frames, over the longer term the gains made by the FTSE 100 significantly undershoots the return made by investors,” says Khalaf.

It has taken the FTSE 100 eight years to rise from 7,000 to 8,000, a return of 14.3%. Including dividends, the index has produced a total return of 50%. Over the past decade, the index has yielded a total return of 83.2%.

So, as Khalaf explains, “while the headline FTSE 100 index is a perfectly good measure of day-to-day market movements, investors shouldn’t be fooled into thinking it’s an accurate reflection of long-term returns from the stock market.”

With a history stretching back to the dawn of civilisation, investing in gold is perhaps one of the most tried-and-tested economic transactions you can make.

It’s been a prosperous period for gold investors recently. Strong demand from various sources drove global gold prices to new all-time highs early in 2026.

The price of gold hit an all-time high of $5,595 on 29 January, having been driven upwards during the month by Trump’s intervention in Venezuela and rumours that the president was about to nominate a dovish chair of the Federal Reserve (Fed) to replace Jerome Powell.

In the end, Trump went with a more hawkish Fed chair pick. Gold prices were starting to decline, before falling rapidly from the beginning of March as the conflict in the Middle East prompted a rush for liquidity.

Gold outperformed the S&P 500 in 2025 for the second calendar year in a row, and despite recent falls, it is still up 11.8% so far in 2026 – compared to 1.6% for the S&P 500. If you are considering where to invest for 2026 then an allocation to gold may well be tempting.

“The case for gold as a core portfolio allocation continues to strengthen, particularly in the current environment of persistent inflation, elevated geopolitical tension and uncertain monetary policy,” said Cosmo Sturge, director, market strategy at precious metals fund manager Baker Steel.

There are various ways that you can add gold to your portfolio. These range from buying gold bullion to investing in a gold ETF.

“Physical gold, in the form of coins and bars, offers direct ownership with no counterparty risk, appealing to investors seeking tangible wealth preservation, albeit with storage and insurance costs,” said Sturge. “Physically backed gold ETFs provide a convenient and cost-efficient alternative, delivering exposure to the gold price without the practical challenges of holding bullion.”

We take a look at the pros and cons of each approach.

Gold investing for beginners

If you’re just getting started in investing, it’s worth considering the role that gold could play in your portfolio. It’s tempting to buy gold during a bull run like the one it enjoyed last year, but even when gold prices aren’t climbing there are good reasons to include an allocation in your portfolio.

“Gold can be a highly effective hedge against governments’ monetary and fiscal profligacy (monetary debasements and currency devaluations) and tends to become the ultimate safe haven when global geopolitical shocks start to occur,” says James Luke, manager of the Schroder ISF Global Gold Fund.

Traditionally, bonds are used to diversify a portfolio away from equities, the theory being that when bonds underperform, stocks overperform, and vice versa.

However, as Luke explains, bonds have shown a greater degree of correlation with equities in the current market. As such, gold currently offers a greater level of protection against a downturn in equities markets, given its lower degree of correlation.

Despite this, most investors are relatively underweight gold. “We absolutely believe gold deserves a place in investors’ portfolios,” says Luke. “In our view a traditional 60:40 portfolio would benefit from diversifying 10% into a gold allocation.”

How to invest in physical gold

One way to add gold to your portfolio is by buying physical gold in the form of gold bars and gold coins. And though it isn’t usually purchased for investment purposes, bear in mind that any gold jewellery you buy will store value in the same way that other gold investments will.

Physical gold can be purchased from government mints such as the UK’s Royal Mint, precious metal dealers such as Sharps Pixley or GoldCore, and jewellers.

It is an unregulated market so you should be careful to avoid scams. One way to protect yourself is to always check whether a dealer is part of the London Bullion Market Association (LBMA), which sets standards across the industry.

As with any investment, it is important to do your own research on prices. Gold dealers make their money by selling for more than the spot price and buying for less. The difference – or spread – will vary depending on the gold content and weight of the bullion, who you buy from, and current supply and demand.

Gold coins can have more value than bars as they may be rarer and are often viewed as collectables, known as numismatic coins. Some forms of gold coin are tax-exempt, as they are legal tender. That means you won’t incur capital gains tax (CGT) if you sell them for a profit.

As attractive as buying a gold bar or coin may be, you should also consider the cost of delivery, insurance and secure storage. One solution may be using an online investment service such as BullionVault, which lets you invest in gold bars or coins which are stored in its vaults.

The Royal Mint also has a digital option that lets you invest in physical gold, silver or platinum based on monetary value instead of weight. It can then be stored in the Royal Mint’s vault.

Investing in gold with ETFs and ETCs

A simpler and cheaper way to invest directly in gold is through exchange-traded funds (ETFs) – or to be precise, exchange-traded commodity (ETC) products.

Analysts typically favour physical-backed ETCs, such as iShares Physical Gold (LON:SGLN), over leverage-style products that rely on derivatives, adding extra complexity.

“An ETC owns physical gold and tracks the price,” says Ben Yearsley, investment director at Shore Financial Planning. “It’s as close as most people get as it’s simple and can be held in your SIPP and ISA.”

The main benefit of using ETCs to invest in gold, according to Paul Syms, head of EMEA ETF fixed income and commodity product management at Invesco, is their simplicity and cost-effectiveness.

“It’s low cost, and [an ETC] trades throughout the day,” he says.

You won’t actually own any gold directly – although The Royal Mint Responsibly Sourced Physical Gold ETC (LON:RMAP) allows investors to exchange shares for physical gold coins or bars.

Owning a gold ETF or ETC will allow you to benefit from any growth in prices. Of course, you will also lose money if the gold price drops.

Take a look at our article on the best gold ETFs for more information.

Investing in gold miners

Rather than buying actual gold, you could consider backing the companies involved in gold exploration or mining. This would mean buying shares in gold miners. This requires significantly more research than tracking the gold price, as a company’s success will be linked to its exploration activities, business strategy and management.

“While gold miners carry additional volatility versus physical gold, they can offer operational leverage to rising gold prices, as well as shareholder returns and exploration and development upside,” said Baker Steel’s Sturge. “Gold miners are currently benefitting from strong margins and are maintaining capital discipline, creating a potentially strong environment for performance.”

While investing in gold miners can come with greater reward, there is also the risk of incurring greater losses.

Investors should also pay attention to the size of the company, says Evangelos Assimakos, investment director at Rathbones Investment Management.

“Smaller companies will usually have a greater proportion of their operations in mines that have yet to start production and thus carry more execution risk should their plans get pushed further into the future or see a reduction in expected output,” he explains.

Rather than picking individual gold mining stocks – which can be more volatile compared to physical gold or gold price trackers, and therefore carry greater risk – you could select a fund consisting of gold miners. For example, the L&G Gold Mining UCITS ETF (LON:AUCP) tracks the Global Gold Miners Index, and as such holds companies like Agnico-Eagle Mines (LON:0R2J) and Newmont (LON:0R28).

The pros and cons of investing in gold

One drawback of investing in gold is the lack of income available from physical gold or through gold ETFs which don’t pay dividends.

What’s more, the price of gold can be volatile over the short or medium term, making it hard to know if you are buying at the top or bottom of the market.

However, advocates see the metal as a useful diversifier, as its value and performance don’t correlate with those of other assets. It also has a reputation for retaining its value well in periods of inflation.

“Gold’s role as a store of value and hedge against currency debasement has been reinforced in recent years, while its low correlation with general equities provides valuable diversification benefits,” said Sturge.

UK small- and mid-cap stocks, like those in the FTSE 250, are a gold mine for income investors thanks to low valuations and high dividend yields.

The FTSE 250 index comprises the UK stock market’s 101st to 350th largest companies - also known as medium-sized or mid-cap companies. While they are not big enough to be part of the FTSE 100, they are still some of the UK’s largest publicly-traded enterprises and often feature as the top stocks to buy.

Richard Hunter, head of markets at investment platform interactive investor, says: “The FTSE 250 index is widely regarded as being something of a barometer for the UK economy, as opposed to the FTSE 100 where some 70% of earnings come from overseas.”

The FTSE 250 gained 6.6% in share price terms in the year to 3 December. But on a total return basis – which factors in dividends – this return rises to 10.4%.

“Yields on both the FTSE 250 and the FTSE SmallCap (excluding investment trusts) indices remain above the FTSE 100,” said Chris McVey, deputy head of quoted companies at Octopus Investments.

Income investors have a “once-in-a-cycle” opportunity to buy into UK small- and mid-cap stocks at depressed valuations, according to McVey in Octopus Investments’ latest dividend barometer.

“Investors should take advantage of this now as UK smaller-cap stocks can offer them a compelling opportunity in terms of both absolute and relative value, as well as income, benefitting from attractive and growing dividend streams,” said McVey.

Why are FTSE 250 stocks good value for income investors?

UK stocks trade at a discount, especially compared to US counterparts. The year so far has seen a partial narrowing of this divide in the FTSE 100, but the re-rating has yet to spread to UK small- and mid-cap stocks.

This relative undervaluation means that UK smaller companies offer greater dividend yields (which are calculated as a percentage of share price) compared to their larger counterparts.

“There is an exceptional opportunity at the moment in medium-sized UK higher yielding companies,” said Simon Gergel, manager of Merchants Trust (LON:MRCH). “The stock market is highly polarised and negative sentiment about the UK economy has created a great opportunity set for long-term investors.”

“We believe it’s an anomaly that these companies are continuing to fly under the radar for traditional income investors,” said McVey.

Three FTSE 250 dividend stocks

Ithaca Energy

Analysts led by Werner Riding from investment bank Peel Hunt rated Ithaca Energy (LON:ITH) a Buy and raised their price target to 260p from 200p following strong third-quarter results announced on 19 November.

“Ithaca has continued to build momentum year-to-date, supported by active NOrth Sea development and strategic partnerships,” wrote Riding.

As of 4 December, Ithaca offers an impressive annual dividend yield of 10.9%.

B&M

Considering the pessimism over the UK economy that abounded at the start of the year, some experts anticipated discount retailer B&M (LON:BME) to struggle.

That has proved to be the case, with the company enduring a stark selloff. Shares are down 55% this year, but Peel Hunt analysts are optimistic that new management can turn the company’s fortunes around.

“Arriving at B&M, new CEO Tjeerd Jegen faced a long to-do list,” said Peel Hunt analysts Jonathan Pritchard and John Stevenson in a research note. “Before, too much time was spent obsessing over store aesthetics and too little on understand what customers wanted [and] what worked for B&M.”

Providing that the return to retail basics is successful, Pritchard and Stevenson “see potential for a format that clearly works to return to its past glories”. They set a price target of 200p on 25 November, implying 22% gains from the latest close at the time.

Income investors will note that, trading at current depressed levels, B&M offers a dividend yield of 8.2%.

TBC Bank

Shares in TBC Bank Group (LON:TBCG) have gained 29% in the year to date. Despite these gains, it is still offering a dividend yield of 5.2%.

While forecasts for 2026 have been cut thanks to regulatory changes in Uzbekistan, where the Bank does most of its business, Peel Hunt analyst Start Duncan views this as “a delay rather than a fundamental change to the longer-term growth potential”.

Index funds, also known as tracker funds or passive funds, offer all sorts of benefits to investors.

While actively-managed funds can often incur high management fees for the supposed expertise of the fund manager, index funds are a low-cost alternative that offer investors convenient access to a sector or geography.

Some of the top funds that investors choose are, unsurprisingly, index funds – especially as passive funds often outperform their active counterparts.

“There is a high rate of underperformance for active investing strategies so there is a persuasive school of thought that investors should just aim to maximise returns by minimising costs with inexpensive index funds,” Rob Morgan, chief investment analyst at online investing platform Charles Stanley Direct, told MoneyWeek.

“They represent a particularly good strategy for areas where portfolio managers consistently struggle to beat the market index – often large, well-researched markets. The US market is a prime example, and investors will have done well in recent years simply to buy an S&P 500 tracker,” Morgan added.

Index funds can typically offer low costs (as well as low transaction fees due to low turnover).

Here, we’ll explore some of the tracker funds available to UK investors that carry the lowest ongoing fees, as potential low-cost additions to your portfolio.

What are index funds?

An index fund replicates the performance of a major index, like the FTSE 100 in the UK or the S&P 500 in the US.

“They do this by simply buying the same (or at least very similar) mix of investments as the index they track,” said Morgan.

“Rather than trying to beat the market, index funds simply aim to replicate it,” said Chris Beauchamp, chief market analyst at online investing platform IG. “They hold the same securities as the index they track, in the same proportions, so when the index rises, so does the fund, and vice versa.”

Low costs and more: what are the advantages of index funds?

The active versus passive investing debate is age-old. In theory, a skilled active manager will pick and choose stocks that will outperform the broader market benchmark (usually an index that a tracker fund will follow).

In reality, however, beating the market is difficult and the majority of active funds not only fail to do so but also significantly underperform. That, coupled with the fact the fees on active funds are almost always higher, means they can be an inadvisable way to invest in the stock market.

“Low costs are the headline advantage [of index funds], as annual charges are typically well below 0.5%, compared to 1%+ for actively managed funds,” said Beauchamp. “Over time, that difference compounds significantly.”

AJ Bell’s latest Manager versus Machine report, released in December 2025, showed that less than a quarter (24%) of active funds outperformed a passive alternative over the 10 years to 30 November 2025 – the lowest that metric has been since AJ Bell started running the report.

“There’s no dressing it up, it’s quite simply been a dreadful decade for active fund managers,” said Laith Khalaf, head of investment analysis at AJ Bell.

^{Source: AJ Bell and Morningstar, total return in GBP to 30 November 2025.}

Index funds aren’t just lower-cost alternatives to active funds, but they have also generated higher returns in recent years.

They are also “simple to understand, easy to buy, and inherently diversified, owning a slice of every company in an index rather than betting on individual stocks”, adds Beauchamp.

What are the disadvantages of index funds?

One of the obvious drawbacks of index funds is that, while they won’t underperform it, they won’t outperform the index they are tracking. Actively managed funds, by contrast, have the potential to beat their benchmark.

They also potentially expose investors to concentration risk, given that market cap-weighted indices become concentrated in the largest stocks.

“It is worth noting that the huge rise in the share prices of a cluster of large tech and e-commerce businesses has overwhelmingly driven the US market over the past decade,” said Morgan.

“Given the now-concentrated nature of these indices, should these stocks have a tougher time, a standard US or global index fund could struggle. You could say that investing in the US market passively has rarely been as concentrated, and therefore as risky, as it is today, and the more diverse approach of an active fund could help temper this.

12 low-cost tracker index funds to consider

Here, we’ve picked out a (non-exhaustive) selection of some low-cost index funds and exchange-traded funds (ETFs) that highlight the different kinds of exposure index funds can offer.

This information does not reflect all the fees and charges (as well as discounts) that might apply through different brokers.

^{*To 26 February 2026, via Fefundinfo}

Beauchamp highlighted VWRL, calling this “a genuine one-stop-shop for diversification” given the broad exposure across developed and emerging markets it offers by tracking the FTSE All-World Index.

^{*To 26 February 2026, via Fefundinfo}

^{*To 26 February 2026, via Fefundinfo}

^{*To 26 February 2026, via Fefundinfo}

I thought today I would check in on some charts that I haven’t looked at in a very long time.

That is the Dow-gold ratio - the long-term ratio between the price of gold and the value of 30 of the most prominent companies in the US, aka the Dow Jones Industrial Average.

What is the purpose of this exercise?

Effectively, you are measuring stocks in money that hasn’t been debased. There are many who argue that the gold price is suppressed, but let us put such thoughts to one side and accept that, even if it has, gold’s value - its purchasing power - has preserved way better than the US dollar’s, or indeed any national currency.

In this instance, gold is a better unit of account, and the act of valuing stock prices in gold can tell you, quite quickly, which asset is cheap and which is expensive.

So here, courtesy of Nick Laird over at goldchartsrus, is the Dow-gold ratio since, get this, 1800.

A major change in the evolution of money

There is a lot to take in here.

The period from 1800 to 1913 is of considerable historical interest, but it is fairly irrelevant to use as investors. Gold was money in the 19th century and the US stock market was young.

Nevertheless we observe how the value of America’s companies grew incrementally over the course of that century, but in a relatively measured way. There was not the volatility that came with the post 1913 era of central banking.

When the black line is rising it means that stocks are rising in price, relative to gold.

220 years- Dow/Gold Ratio

Turning next to the post 1913 era. Nick has drawn a vertical red line at 1913 because that is when the US Federal Reserve Bank was formed. The following year the UK, France and Germany all abandoned their gold standards to print money to pay for World War One.

The period saw a major sea change in the evolution of money and banking.

You can see that there were three major highs - in 1929, in 1971 and in 2000. Again these were all years that saw major financial turning points. 1929 was the top of the stock market before the Great Crash. 1971 was the year President Nixon took the US off the gold standard. And 2000 was the year DotCom peaked while gold came to the end of a 20-year bear market.

Also notable are the years 1932 to 1933 - the low in stocks in the Great Depression and the time President Roosevelt confiscated Americans’ gold and then devalued the dollar.

And 1980 too. That was the year that the great gold bull market of the 1970s came to end. Gold spiked with the Iranian hostage crisis to $850/oz and, with Fed chief Paul Volker’s raising the Fed funds rate to 20%, the era of inflation came to an end and the stage was set for the next bull market in stocks.

Here is the last 120 years in close up.

120 Years - Dow/Gold Ratio

With the Dow today at 33,800 and gold at $1,790/oz it takes 19 ounces to buy the Dow. So gold is right in the middle of the range. It is neither expensive nor cheap. The same could be said of stocks.

There are many who argue that the Dow-gold ratio is going back to 1, as it did in 1980. That return could take many forms. There could be an extraordinary bull market in gold, inflation in the US dollar and stocks could simply remain flat. In such a scenario gold would have to go to $33,000/oz.

I don’t think that is going to happen, unless the US suddenly decides it is going to settle its debts with its gold and revalues the price upwards. Unlikely.

I suppose it’s possible that some deflationary panic, a war or a global pandemic, could send stocks tumbling by 50%, while gold itself goes up 10 times. Again unlikely. But these are the kind of scenarios we would need for that ratio to go back to 1.

I just don’t think it’s realistic. It might have been normal in the 19th century, but not today.

On the other hand, a runaway bull market in stocks could see the Dow double over the next three years while the world becomes even less interested in the analogue asset that is gold sending the price back to $1,300.

In that kind of scenario you would have a Dow-gold ratio at 50.

It would be above and beyond the green confidence band on the chart at extremities, but I have to say I would have thought a Dow-gold ratio at 50 is more likely than at one.

But based on the chart above, gold is probably a sell below 10 on the ratio.

Asset allocation for the next market cycle

Alternatively, here is the S&P 500-gold ratio.

With the S&P currently at 4,120 and gold at $1,790/oz that ratio currently stands at 2.3.

100 Years S&P 500/Gold Ratio

This a ratio that could easily go to one. If the S&P comes off a little bit, say 25% to 3,000 while gold has a big run to $3,000 - which is not such an impossible number - the S&P-gold ratio will hit one. It’s unlikely, but not impossible.

Similarly the S&P could go to 7,000 or more as gold falls to $1,500. Then you’ve got an S&P-gold ratio at 5. Not such an impossibility.

Stocks have been rising relative to gold since 2011, when gold last peaked. In the last three years they’ve wobbled a bit.

Where’s that one headed? One or five? Or do we stay where we are around 2?

It’s a big call. But it’s an important one to get right, as you allocate assets for the next cycle.

And if you happen to be in Edinburgh this week, please come and see my show How Heavy?, a lecture with funny bits about weights and measures. It’s running at the Fringe until Sunday. You can get tickets here.

The FTSE 100 is only a few percentage points up since its dotcom peak in December 1999, says James Yardley in the i newspaper. London is starting to resemble the similarly “hated” Japanese equity market, says Steven Andrew of fund manager M&G. “Places get this reputation from investors because they don’t make lots of money and they can be a bit dangerous if you own them at the wrong time.”

“For all the criticism aimed at the UK benchmark,” note that “the FTSE 100 has delivered an average annual total return of 7.75% since its inception in 1984,” says Investors’ Chronicle. True, that lags America’s S&P 500, but “it’s easily more than double the average UK inflation rate over the same period”.

What’s more, the London blue-chip index has been the best-performing major stock index so far this year (it has gone nowhere, while other global markets have plunged). “There is a certain irony in that the much-derided composition of the FTSE 100 is the main reason why it has held up reasonably well over the past six months or so.”

The FTSE 100’s weighting towards energy, mining and banking stocks have made it a refuge in the inflationary storm. By contrast, the FTSE 250, down almost 16% in 2022, has struggled owing to its greater weighting towards more cyclical industrial and consumer shares. The FTSE 100 bucks weakness in the UK economy because 80% of its earnings come from overseas. Analysts at Link Group think that sterling’s weakness should provide a £3.5bn-£4.5bn boost to total dividends this year; dollar earnings are inflated when translated into a weaker pound. A strong showing from miners helped push UK payouts to £37bn in the second quarter, the second highest figure on record. Link Group now expects headline payouts to climb by 2.4% in 2022 to £96.3bn.

“On a relative basis… British shares are incredibly well placed because we never had the bubble that America had,” Richard Buxton of the Jupiter UK Alpha fund told Danielle Levy in The Daily Telegraph. “We have some great companies… which are pretty cheaply valued. British shares offer a place to hide in difficult times in financial markets.”

Traders dislike Truss

The UK market could yet be heading for the odd bout of turbulence if Liz Truss is the next prime minister, however. “Truss’s policy platform… poses the greatest risk from an economic perspective… with an unseemly combination of pro-cyclical tax cuts and institutional disruption,” according to Ben Nabarro of Citigroup.

Truss is considering reviewing the Bank of England’s mandate to ensure it is tough enough on inflation, although she says this should not threaten its independence. The more predictable Rishi Sunak is the market’s favourite.

On the face of it, Imperial Brands (LSE: IMB) looks to be one of the most attractive income stocks in the FTSE 100 with a prospective dividend yield of 8% for 2022 and 8.1% for 2023.

Refinitiv analyst estimates also have the stock trading at a forward price/earnings (p/e) multiple of 6.9.

However, I wouldn’t take these figures at face value; in my opinion, Imperial’s stock looks cheap – but it is cheap for a reason.

Over the past ten years, Imperial has failed to create any substantial value for investors. The shares have returned 2.6% a year including dividends, compared to 6.2% for the FTSE All-Share Index.

What’s more, net income excluding extraordinary items has barely budged since 2014. Net income did jump in the financial year ending 30 September, 2021, although this was mainly down to a favourable financing charge. Excluding this positive development, adjusted group operating profit rose just 0.5% after stripping out the contribution from the now sold cigar division.

The dividend cut hurt sentiment towards the FTSE 100 company

While British American Tobacco (LSE: BATS), Philip Morris, Altria and Japan Tobacco International have become known the world over for their cash flow and dividend credentials, Imperial has struggled. In order to meet investor concerns about the overleveraged state of its balance sheet, it cut its dividend by a third in 2020.

This cut rebased the dividend to a more sustainable level. In the four years prior, dividend cover averaged just 0.6. To put it another way, Imperial Brands had been consistently paying out more than it could afford.

In my opinion, the decision to cut the dividend by a third was the right one. It had been bridging the gap between profits and dividends with borrowing, straining its balance sheet. A lower payout will not only help Imperial to cut borrowings, but will also help it deal with rising interest rates.

The decision to rebase the dividend is part of the new CEO’s growth plan.

In 2021 CEO Stefan Bomhard unveiled a five-year strategic plan to concentrate investments on the markets and regions where Imperial has the edge; the plan also acknowledges that it is a follower, rather than a leader in most markets, so it should focus on driving cash generation and returns for investors rather than trying to fight off bigger competitors with deeper pockets.

Unfortunately, while I believe the decision to cut the dividend was the right one, I think it decimated investor confidence. It could also explain why the market does not seem to have much confidence in its current dividend and valuation.

Still, Imperial’s management is pushing on with its transformation strategy and 18 months in, it is entering the “strengthening phase. ” In this phase it aims to develop and reinforce its position in its main markets, namely the US, UK, Australia, Spain and Germany.

In the six months to the end of March, Imperial increased its market share by 25 basis points in these primary markets, a notable development after an extended period of underperformance.

Nevertheless, there’s no denying the business faces a huge uphill struggle in the years ahead. As well as fighting off competitors, management is also going to have to deal with increasingly stringent tobacco regulations around the world.

Launching new so-called next-generation products, the category that includes e-cigarettes, heated tobacco and snuff products, is part of this strategy. During the six months to the end of March, adjusted operating losses from next-generation products improved by 50%.

Imperial Brands is making progress, but it has lots of work to do

When I am looking for dividend stocks to add to my portfolio, I tend to concentrate on businesses with robust balance sheets, a strong track record of creating value for investors and growth potential. If a company is not growing and paying more than it can afford to shareholders, sooner or later it will suffer the consequences.

To give Imperial its credit, it seems to have realised it was heading in the wrong direction. However, it’s going to take a lot to convince the market the business is back on the right track.

Then there is the fact that it faces much stronger competitors in its key markets, including Philip Morris and Altria, which own the rights to the Marlboro brand internationally and in the US respectively.

The company has acknowledged that it is a follower, not a leader, Which makes sense from a strategic planning point of view. However, as an investor, I’m not really looking to invest in corporations that are second best. Why would I? With thousands of companies to choose from around the world, I focus on finding market leaders.

That’s why I hold British-American in my portfolio, even though it is more expensive and has a lower dividend yield than Imperial. I’m planning to steer clear of Imperial until it can prove it’s on a sustainable growth trajectory.

Disclosure: Rupert Hargreaves owns shares in British American Tobacco.