LONDON -- The FTSE 100 has had a great start to 2013. Since the new year began, the blue chip index is up 3.8%. That's a strong rise in just two weeks. In 2012, the index managed just a 6% advance for the whole year.
So far in 2013, the average FTSE 100 share is ahead by 2.3%. The index's best performer is International Consolidated Airlines Group (IAG 0.69%), the worst is Tullow Oil (-7.3%). Of the 100, 72 shares are up. Twenty-eight shares are down.
Here are the big winners.
|
Company |
Price (pence) |
2013 P/E (forecast) |
Rise in 2013 |
Market cap (million pounds) |
|---|---|---|---|---|
|
International Consolidated Airlines |
208 |
19.4 |
11.6% |
3,805 |
|
Meggitt |
431 |
11.5 |
11% |
3,383 |
|
ARM Holdings (ARM) |
870 |
48.5 |
11% |
11,960 |
|
Eurasian Natural Resources Corporation |
323 |
9.8 |
10.7% |
4,143 |
|
Glencore International |
392 |
10 |
9.9% |
27,571 |
|
Barclays (BARC 1.64%) |
300 |
8.1 |
9.8% |
36,488 |
|
Lloyds Banking Group (LLOY 0.27%) |
54 |
14 |
9.8% |
37,959 |
|
Xstrata |
1,176 |
13.2 |
9.5% |
34,523 |
|
Royal Bank of Scotland Group |
360 |
13.1 |
9.2% |
40,482 |
|
John Wood Group |
801 |
13 |
8% |
2,970 |
|
BP (BP 0.27%) |
462 |
7.8 |
7.6% |
88,179 |
|
NEXT |
3,995 |
14.2 |
7.1% |
6,533 |
Five caught my eye in particular.
International Consolidated Airlines Group (ICAG)
ICAG is the airline group formed following the merger of British Airways and Iberia.
Investors are often quick to dismiss investment in the airline sector. History shows that the business has rarely produced good results for investors.
However, ICAG's share price chart demonstrates just how well an airline group can do when economic sentiment turns. Premium airlines like British Airways need a high level of business use to make a good profit. Since September, investment markets have become more confident that the eurozone will avoid economic disaster. ICAG's shares are up 29.6% in that time.
The current share price suggests that ICAG will have to match these improved sentiments with profits for its share price to hold up. ICAG is expected to report a loss for 2012 and earnings per share of 0.13 euros for 2013.
BP
Will 2013 be the year that BP finally puts the oil spill of 2010 behind it? A recent $1.4 billion fine for disaster-well partner Transocean has inspired a rise in the BP share price. That's because the market has been forced to reassess the likely cost of the disaster to BP.
Current speculation is that BP will be fined around $20 billion for the pollution caused by the Macondo oil spill. If BP can force its partners to pay a portion of that, then the damage to BP could be considerably less.
BP shares currently trade at their highest since April 2012. The company is forecast to report earnings for 2012 of $0.96, putting the shares on a price-to-earnings ratio of 7.9, falling to 7.8 times expectations for 2013.
Lloyds Banking Group (Lloyds)
Lloyds was the FTSE 100's biggest winner in 2012. The company is in contention to repeat the trick in 2013.
As the bank that suffered the most from PPI misselling, it is Lloyds' profits that will see the biggest improvement when PPI payouts are finished.
Like the rest of the banks, Lloyds has benefited from an apparent easing of banking regulations. This will make it easier for Lloyds to lend in the future. That will be positive for profits. The chances of Lloyds paying a dividend in 2013 or 2014 have also increased significantly.
The consensus of analyst expecations is for Lloyds to report EPS of 2.5 pence for 2012 and 3.9 pence for 2013.
ARM
ARM is one of the few world-class technology companies headquartered in the U.K. ARM designs the processors that go into modern smartphones and tablets. As a world-leader in its field, ARM and its shareholders are reaping the rewards of being at the center of a booming industry.
In the last year, shares in the company are up 47.2%. Earnings for 2011 were 33% ahead of 2010. The company is expected to report a 62.6% increase in EPS with its 2012 results. Analysts forecast a 24.3% increase in EPS for 2013.
The trouble is, this high growth comes at a high price. ARM shares trade on a 2013 P/E of 48.8.
Still, the tablet is becoming a household must-have. How much are you willing to pay for a company selling a high-margin product into a fast-growing market with years of growth ahead of it?
Barclays
Shares in Barclays have advanced 83.3% in the last six months. Despite that rise, I believe that the shares are still demonstrably cheap.
Like Lloyds, Barclays has benefited from the turnaround in the equity markets that begun with the U.S. response to its "fiscal cliff" issues. Barclays will also benefit from the friendlier reserving rules world bankers recently agreed on.
Add this bullish news to a bargain valuation and you have the recipe for strong share-price gains.
Could Barclays' rise continue? I believe that it will. Banking analysts expect that in February, Barclays will report EPS of 35.6 pence for 2012. This puts the shares today on a P/E of just 8.4. That's cheap, considering the average FTSE 100 share trades on a P/E of almost double Barclays'.
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