Stock market winners and losers in the last two years

Over the past two years, I have recommended a wide range of stocks. I’ve been right more times than I’ve been wrong, which is always encouraging for investors. It is worth reviewing mistakes and successes, though, to understand what we can learn. 

Stock market winners and losers

Outperforming stocks

The first two companies I ever recommended were Rio Tinto (LON: RIO) and BHP (LON: BHP). In April 2022, I argued that these businesses had the scope to return vast amounts of cash to investors over the following years. That’s just what happened. Rio returned 735p per share in 2022 and 2023 (14% of its share price at the time of my recommendation), while BHP returned 476p (19% of its share price at the time of the recommendation). Analysts expect this trend to continue, with a yield of 5.1% pencilled in for BHP in 2024, followed by a yield of 5.3% in 2025. Rio’s forecast yield is 6.6% for 2024 and 6.5% for 2025.

In November 2022, I recommended that investors buy shares in the pub and hotel group Fuller, Smith & Turner (LON: FSTA) when it was still recovering from the pandemic. Still, I liked its prospects, freehold-rich balance sheet, 2.5% dividend yield, and shareholders’ discount of 15% in its pubs and hotels. The stock has returned 37% since the tip, excluding dividends. The company recently reported a bumper set of results for 2023, hiked its payout and outlined plans to spend millions on share buybacks while investing in its estate.

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In December 2022, I highlighted AG Barr (LON: BAG), the maker of Irn-Bru. This stock has returned nearly 20% since my tip (excluding dividends) thanks to profit growth and acquisitions, specifically that of Boost Drinks. With a yield of 2.7%, £49 million of net cash on the balance sheet and two years of projected double-digit earnings growth ahead of it, there are still plenty of reasons to buy.

Reits disappoint

Throughout the first quarter of 2023, I focused on real estate investment trusts (Reits). I highlighted Supermarket Income Reit (LON: SUPR) in January 2023, and sadly, this has been a disappointment. Shares in the company have fallen by around 27% since the recommendation, although the dividend yield of 8.4% has softened the blow. What attracted me to the business in the first place, a high-quality property portfolio with inflation-linked contracts and blue-chip tenants, hasn’t changed; the stock is also trading at a 20% discount to its last reported net asset value (NAV). On that basis, I think there is still value here.

I picked out Industrials Reit in February 2023, when the shares were trading at around 125p. A few months later, in April, private equity giant Blackstone offered 168p per share to buy the company, delivering a handsome return in just a few months.

Another property clanger was Great Portland Estates (LON: GPE), or GPE. I tipped this stock at the beginning of June 2023 on the basis that its portfolio of high-quality London offices, mainly based in the West End, was undervalued. In some respects, I was on the money.

The group recently reported its 2023 results and unveiled a high single-digit jump in leases renewed as tenants competed for the best-quality office space. Its properties, moreover, were fully occupied at the end of the year. However, the value of the company’s portfolio has fallen as interest rates have consolidated at a higher level. Concerns about its balance sheet and the cost of its development pipeline have also intensified. At the end of May, GPE laid out plans to raise £350 million via a rights issue to offset some of these difficulties. I believe the company’s portfolio has value, but the market doesn’t. The stock has produced a total return of less than 1% over the past year.

Insurance companies proved to be a safe choice

Admiral (LON:ADM) (recommended in September 2023) was one of my better tips. Lower losses and higher insurance premiums charged to consumers have helped boost the company’s bottom line. With dividends, the stock has returned 31% over the past year.

In December 2023, I recommended Premier Foods (LON: PFD) and Lancashire Holdings (LON: LRE), the owner of Mr Kipling and other brands, and a Lloyd’s of London insurance group. Both have performed relatively well in a very short space of time, with Premier Foods returning around 40% and Lancashire returning 20%, thanks to hefty special dividends. Both could grow further as they benefit from upswings in their respective markets. Premier Foods has a particularly exciting future after shedding the bulk of its pension commitments.

At the beginning of this year, I recommended two very different companies, The French Champagne group Laurent Perrier (EPA: LPE) and Lloyds Banking Group (LON: LLOY). Laurent Perrier has, so far, proved to be a dud. The stock has fallen by 6% year-to-date due to concerns about the state of the luxury goods industry worldwide, the rising competition of English sparkling wine and climate concerns.

On the other hand, Lloyds has been a winner, with a gain of nearly 20% on a total return basis as the lender has benefited from the higher interest-rate environment and improved sentiment towards the UK economy. I’ll stop at January 2024 because I believe anything less than six months is far too short to judge a company’s performance. Still, when I look back again in a year or so, I hope I’ll also be reporting on a record with more winners than losers.

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