The landscape of British stocks has seen a blend of performance indicators throughout 2023, driven by various economic factors and market dynamics. Softer inflation rates and a decrease in interest rates have provided some upward momentum in the market. However, investor confidence has fluctuated following the first budget announcement from a Labour government in over a decade. Despite these uncertainties, selected tips from Tempus for 2024 show promising returns, averaging a total return of 19.1%. This outstrips the FTSE 100 index at 12.2%, FTSE 250 at 6%, and FTSE All Share at 6%.
Amazon emerged as the best performer among the advised stocks, boasting a total return of 47.4%. The technology giant has benefitted significantly from substantial investments in artificial intelligence, which in turn have supported its growth expectations and market valuation. This sentiment was echoed when a spokesperson noted that "consistent beats on earning expectations, combined with better cash flow, have helped the stock to soar this year."
Marks & Spencer was another strong performer, achieving a total return of 44.8%. The transformation under CEO Stuart Machin has led to rejuvenated brand identity and improved sales, allowing the retailer to capture market share from its competitors. The financial institution Paragon Banking also showed robust performance, increasing by 20.7% in the same year, with a promising pipeline of buy-to-let lending reflecting market strength.
However, not all companies performed equally well; Empiric Student Property struggled with a 5.3% decline, despite a brief rally, as less explosive half-year results weighed on investor sentiment. Diageo faced the steepest challenges, ending the year down by 12.3%. Despite previous arguments suggesting that early setbacks in sales forecasts might not impact overall performance, the distiller could not regain its market premium.
Looking ahead to 2025, expectations remain cautiously optimistic among investors. The incoming Trump administration is perceived as favourably inclined towards the stock market, primarily due to anticipated policy support including lower interest rates and a close relationship between the administration and technology executives in Silicon Valley. This sets a context for identifying promising stocks for the upcoming year.
Highlighted among these potential investments is Qinetiq, a defence research firm poised to nearly double its revenue by 2027, with a goal to improve its operating profit margin. The firm, although struggling to enhance its presence in the United States, possesses long-term contracts that ensure strong revenue visibility.
In the hedge fund sphere, Bill Ackman's Pershing Square is noted for its concentrated investments in quality companies, with a potential to revisit fundraising ambitions in 2025. BP also remains in focus, with renewed strategies under new management aimed at maximising shareholder returns amidst rising oil prices.
Scottish Mortgage is also showing signs of a potential rebound, with a diverse portfolio that includes significant stakes in tech giants such as TikTok's owner ByteDance. The trust has been identified as a popular investment, and its ongoing share buyback programme may help close the discount to its net asset value.
Lastly, Relx, a data and analytics business, has attracted notice due to its recent advancements in generative artificial intelligence as part of its legal division, which includes over 2,000 academic journals. This evolution capitalises on the growing relevance of AI technologies, positioning Relx as a robust investment within this evolving landscape.
Overall, as companies adapt to both the challenges and opportunities presented by advances in technology, particularly AI, and shifting economic conditions, the potential for notable trends in stock performance will likely continue to unfold in the coming years.
Source: Noah Wire Services