Morningstar
RecommendedSign Up to Our Newsletters Open Window IconMorningstar's Guide to Investing in Stocks Arrow Right
Equity Research & Insights

UK Barometer: July 2021

Mid and small cap stocks were the best performers last month in the UK

James Gard 3 August, 2021 | 9:05AM
Facebook Twitter LinkedIn
Font-Size

Barometer showing changeable weather

Every month we look at how the stocks in the Morningstar UK Index have performed according to size and investing style. In a fairly tepid month for the wider index, mid and small-cap growth and blend stocks were the best performing in July, outpacing value stocks of all sizes. Overall small-cap value stocks are ahead for the year to date, although there are signs that growth stocks are starting to catch up as the value rally runs out of steam.

Mid-cap blend stocks were the best performing category in the index, gaining 4.23%, taking the year-to-date rise to more than 15%. This 4%+ gain is more impressive in the context of an underwhelming 0.70% gain for the index. Mid-cap blend is the largest category in the Morningstar UK index with 65 stocks, which  combine elements of value and growth companies. Having a foot in both camps has been useful this year as growth and value have tussled for dominance on a monthly basis; value started well this year but growth has made a comeback. As you would expect from a large range of stocks, there is wide dispersion in performance in the group, from an 18% gain for antivirus software company Avast (AVST) to a monthly loss of nearly 10% for hydrogen energy specialist ITM Power (ITM). ITM Power is also the worst performing share within this cohort in the year to date.

Performance of Stocks Over 1 Month and Year to Date

Morningstar UK Barometer Table

The category is also diverse in terms of industries, with housebuilders (Vistry, Taylor Wimpey) mixed in with asset managers (Schroders, Hargreaves Landsdown), supermarkets (Marks & Spencer, Morrisons) and airlines (easyJet, Jet2). Top performers so far this year include online casino company Gamesys (GYS), which has produced a chunky gain for investors of 64%, while takeover target Morrisons (MRW) and high street bakery Greggs (GRG) are among the select few to boast a 50% gain. Small-cap blend stocks were the next best performing category in July with a gain of 3.68% in July, taking the year-to-date rise to nearly 19%. This category is also a decent size, boasting 64 stocks including pub owner and former stock of the week Wetherspoons (JDW), electricals retailer Dixons Carphone (DC.) and price comparison site Moneysupermarket (MONY). Defence company Ultra Electronics is way out in front of the pack with a solid monthly gain of nearly 40% after a takeover approach from rival Cobham.

While mid and small-cap blend stocks had a decent month, large-cap blend stocks struggled to make headway, softening by -0.5%. The biggest detractor in this group was consumer goods company Reckitt Benckiser (RKT), whose shares fell 13% in July after a disappointing trading update and warnings about rising costs. It was a similar picture with growth stocks, with large growth names struggling, but mid and small cap stocks put in a decent performance, rising 3.5% last month. Within the midcaps, Watches of Switzerland (WOSG) was the best monthly performer, gaining a chunky 20%, pushing the year to date gain to 73%. “Revenge spending” has been a key theme of post-lockdown life, with some consumers keen to spend money saved on luxury watches and jewellery. In terms of yearly performance, Watches of Switzerland was only outpaced by magazine publishing company, Future (FUTR), whose shares have almost doubled this year. Future has pivoted successfully from print to online in the last few years and bought price comparison site GoCompare in late 2020.

Seven months into 2021, small-caop value stocks are still ahead with a gain of 25% and all categories have posted double-digit gains, apart from large-cap blend stocks, which are still up by a respectable 9%. Small-cap growth stocks, which last year were up nearly 40%, are up by just under 15% so far this year.

The Morningstar UK Index, which covers more than 300 stocks with a market cap ranging in size from £100 million pounds to over £128 billion, gained around 0.70% in June but is up 11% in 2021 so far – compared with a similar percentage loss in 2020. 

TAGS

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn
Font-Size

About Author

James Gard

James Gard  is senior editor for Morningstar.co.uk

 

© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures

The Morningstar Star Rating for Stocks is assigned based on an analyst's estimate of a stocks fair value. It is projection/opinion and not a statement of fact. Morningstar assigns star ratings based on an analyst’s estimate of a stock's fair value. Four components drive the Star Rating: (1) our assessment of the firm’s economic moat, (2) our estimate of the stock’s fair value, (3) our uncertainty around that fair value estimate and (4) the current market price. This process culminates in a single-point star rating that is updated daily. A 5-star represents a belief that the stock is a good value at its current price; a 1-star stock isn't. If our base-case assumptions are true the market price will converge on our fair value estimate over time, generally within three years. Investments in securities are subject to market and other risks. Past performance of a security may or may not be sustained in future and is no indication of future performance. For detail information about the Morningstar Star Rating for Stocks, please visit here

Quantitative Fair Value Estimate represents Morningstar’s estimate of the per share dollar amount that a company’s equity is worth today. The Quantitative Fair Value Estimate is based on a statistical model derived from the Fair Value Estimate Morningstar’s equity analysts assign to companies which includes a financial forecast of the company. The Quantitative Fair Value Estimate is calculated daily. It is a projection/opinion and not a statement of fact. Investments in securities are subject to market and other risks. Past performance of a security may or may not be sustained in future and is no indication of future performance. For detail information about the Quantiative Fair Value Estimate, please visit here

The Morningstar Medalist Rating is the summary expression of Morningstar’s forward-looking analysis of investment strategies as offered via specific vehicles using a rating scale of Gold, Silver, Bronze, Neutral, and Negative. The Medalist Ratings indicate which investments Morningstar believes are likely to outperform a relevant index or peer group average on a risk-adjusted basis over time. Investment products are evaluated on three key pillars (People, Parent, and Process) which, when coupled with a fee assessment, forms the basis for Morningstar’s conviction in those products’ investment merits and determines the Medalist Rating they’re assigned. Pillar ratings take the form of Low, Below Average, Average, Above Average, and High. Pillars may be evaluated via an analyst’s qualitative assessment (either directly to a vehicle the analyst covers or indirectly when the pillar ratings of a covered vehicle are mapped to a related uncovered vehicle) or using algorithmic techniques. Vehicles are sorted by their expected performance into rating groups defined by their Morningstar Category and their active or passive status. When analysts directly cover a vehicle, they assign the three pillar ratings based on their qualitative assessment, subject to the oversight of the Analyst Rating Committee, and monitor and reevaluate them at least every 14 months. When the vehicles are covered either indirectly by analysts or by algorithm, the ratings are assigned monthly. For more detailed information about these ratings, including their methodology, please go to here

The Morningstar Medalist Ratings are not statements of fact, nor are they credit or risk ratings. The Morningstar Medalist Rating (i) should not be used as the sole basis in evaluating an investment product, (ii) involves unknown risks and uncertainties which may cause expectations not to occur or to differ significantly from what was expected, (iii) are not guaranteed to be based on complete or accurate assumptions or models when determined algorithmically, (iv) involve the risk that the return target will not be met due to such things as unforeseen changes in changes in management, technology, economic development, interest rate development, operating and/or material costs, competitive pressure, supervisory law, exchange rate, tax rates, exchange rate changes, and/or changes in political and social conditions, and (v) should not be considered an offer or solicitation to buy or sell the investment product. A change in the fundamental factors underlying the Morningstar Medalist Rating can mean that the rating is subsequently no longer accurate.

For information on the historical Morningstar Medalist Rating for any managed investment Morningstar covers, please contact your local Morningstar office.

For more detailed information about conflicts of interest, including EU MAR disclosures, please see the “Morningstar Medalist Rating Analyst Conflict of Interest & Other Disclosures for EMEA”here

Select Your Site Edition To make sure the site is relevant to you, we need to know if you’re an individual investor or a financial professional.