Top 4 FTSE 100 risers to watch during the coronavirus crisis
The FTSE 100 has lost over 25% of its value since the start of the year but a handful of stocks are managing to buck the downtrend. We outline four blue-chip stocks to watch during the coronavirus crisis.
The new coronavirus, COVID-19, was formally discovered on 31 December 2019, and it quickly began to spread in China and other Asian nations. However, it was months until governments in Europe recognised the threat the outbreak posed to their own countries.
The virus, now formally recognised as a worldwide health pandemic, has brought global financial markets crashing down this year. In the UK, the FTSE 100 began to come under pressure in mid-January before accelerating the following month and reaching new lows on 23 March, when the UK government formally put the country into lockdown.
Although it has managed to recover some value since then, the index has still lost more than a quarter of its value since the start of 2020.
What FTSE 100 stocks are rising amid the coronavirus crash?
Unsurprisingly, the coronavirus crash means the vast majority of blue-chip stocks have lost considerable value in 2020. No business has proven completely immune to the severe disruption the outbreak and lockdown measures have caused to businesses.
Although some are rapidly adapting to keep their operations going, many have had to shut up shop altogether. The outlook is bleak as no one knows how long the pandemic will last and lockdown measures will be in place. Even when the UK begins to come out of the other end of this crisis - there is no surety that the economy will be in good shape.
As a result, most companies have been forced to suspend or cancel dividends so they can hoard cash as they prepare to have their balance sheets tested over the coming months. In light of all of this, it is unsurprising that the coronavirus has caused most equities to plummet.
Despite the FTSE 100’s heavy losses, some constituents have managed to buck the downtrend. We have a look at four stocks that are managing to outperform the wider index. You can invest or trade these stocks.
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You can read more on how to measure and trade coronavirus volatility here.
Ocado Group (OCDO)
As the wider market has tumbled, Ocado Group has been one of the few to have seen its share price gain ground in 2020. Ocado shares are trading 7% higher than the start of the year.
There are two arms to Ocado, and both should remain resilient while lockdown measures are in place. The first is its online grocery operation that is run under a joint venture with Marks & Spencer Group (until September, when Ocado will end that relationship to partner Waitrose). Supermarkets are one of the few types of retail outlets that remain open at present and they have seen a huge uptick in sales over recent weeks as people have raided the shelves to stockpile. Tesco, the largest outfit in the UK, said sales spiked by 30% in the peak weeks before the country formally entered lockdown.
Ocado’s operation is purely online, so it is a natural beneficiary as more people order their groceries online as they avoid going outside. But all the supermarkets have struggled to cope with the flood of demand for online grocery because nobody has the capacity to fulfil it.
Ocado’s finance director Duncan Tatton-Brown said the firm could have five to ten times its existing capacity and would still not meet the increase in demand. Ocado has had to stop taking on new customers and has warned of longer delivery times, but this does mean its operation is likely to be running flat out for the foreseeable future.
In the short term, groceries will remain one of the most resilient sectors, generating cashflow that majority of others can only dream of right now. Plus, the coronavirus will naturally accelerate the move to online shopping even once the crisis is over, which provides long-term upside for Ocado.
The second arm of Ocado is its automated warehouse technology. Social distancing has made it difficult for warehouses and distribution centres to work as efficiently as possible and highlights the advantages of introducing the automation technology that Ocado provides, which should accelerate adoption by more retailers.
Ocado’s next scheduled update isn’t due until its annual general meeting (AGM) on 6 May, but it could release something before then due to market conditions.
You can read more about the potential for supermarkets to provide a haven during the coronavirus crisis here.
Hikma Pharmaceuticals (HIK)
Hikma Pharmaceuticals shares have rallied over 9% since the start of the year and are up 28% since the UK entered lockdown on 23 March.
Currently, there are over 50 different potential COVID-19 vaccines in development by an array of pharmaceutical, biopharma and life sciences businesses from across the world. This has seen the share prices of some smaller firms soar on the hope they can make a breakthrough.
However, most of the larger, better-known outfits have not fared as well. GlaxoSmithKline, for example, has shed more than 15% in 2020 despite the fact it is hoping to provide key adjuvants that could boost any vaccine that is discovered.
You can read more about the stocks trying to develop a coronavirus vaccine here.
In light of this, it is surprising that Hikma shares have experienced such a large rise in recent weeks, especially as it isn’t trying to develop a vaccine or treatment for COVID-19. Hikma’s business is built around three segments: injectables, generic drugs, and branded medicines.
Hikma said it didn’t ‘anticipate any material impact’ on its business from coronavirus. But that was on 27 February, before the threat of the virus had been truly recognised by governments outside of Asia.
Plus, it said this was partly down to the fact it has very little manufacturing in China, so the threat of manufacturing shortages from factories being shutdown was minimal.
However, it is unclear how that situation has changed since the virus prompted more countries to follow in China’s footsteps and enter lockdown. The company’s two significant markets, in terms of sales, are the US followed by the Middle East and North Africa.
One reason the Hikma share price has performed well is the strong foundations of its business and the ability to weather the storm. People still need drugs and medicines for other health conditions even if they are in lockdown.
The fact Hikma chose to provide financial guidance for 2020 when it released its annual results in late February underlines the confidence that the business will hold up well, forecasting further growth this year.
It is due to pay its final dividend in May, after the AGM, and the fact it will remain cash generative provides confidence it could be one of a handful of stocks to maintain payouts during the crisis. However, many stocks have suspended or cancelled payouts and clawed back funds from shareholders in order to hoard cash.
Polymetal International (POLY)
After recovering from a short but sharp decline in the middle of March, Polymetal International shares have rallied over 18% since the start of the year and are currently trading at an all-time high.
The gold and silver miner has operations in Russia and Kazakhstan and, so far, there has been no suggestion that its operations have been significantly impacted by the coronavirus outbreak. It made no mention of the virus when it released its annual results for 2019 on 4 March, when it posted a 19% rise in revenue while net earnings soared to a new record high. Gold is usually regarded as a safe haven asset that benefits when there is uncertainty in the market and, although prices have been volatile, it has increased since the start of the year.
The share prices of miners tend to track, to a degree, movements in the price of whatever commodity they are mining. FTSE 250 gold miners Fresnillo and Centamin have also managed to book gains this year.
The fact Polymetal not only continued to pay dividends when it released its results but also dished out a special payout puts confidence behind the miner’s ability to maintain payouts at a time when most large companies are suspending them. Mining is emerging as one area that could provide a haven to income investors this year and Polymetal could
Scottish Mortgage Investment Trust (SMT)
Scottish Mortgage Investment Trust shares suffered a dip in February, but its shares have bounced back and are currently trading 2.3% higher than at the start of the year. Its latest net asset value (NAV) per share was declared as £5.9567 at the end of February, which is just below its current share price.
The company is Baillie Gifford's flagship investment trust. Despite what its name suggests, the company has a portfolio of global investments that provides an easy way to add some diversification to your portfolio. It has over £8 billion worth of net assets and is one of the largest investment trusts in the UK.
One reason Scottish Mortgage Investment Trust may have outperformed the wider market this year is because of what companies it has invested in. Some of its biggest investments look well placed to mitigate the coronavirus crisis, such as Amazon, Alibaba, Tencent, Delivery Hero and Netflix.
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