This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
“I only trade the FTSE”. I’ve heard this familiar refrain multiple times around the trading floor. This can be due to force of habit, conservative trading attitude or just lack of familiarity. A significant portion of London’s retail investors prefer to only buy and sell FTSE 100 blue-chip stocks.
There is no double that the FTSE 100 index features many exciting household names. Limiting yourself just to those 100 biggest public companies, however, doesn’t necessary offer the full gamut of exciting tradable opportunities.
Many new and prospective clients I speak to explain their narrow focus by pointing to trading conservatism. And fair is fair, everyone has their own risk appetite. It’s not my place to tell people what to buy or sell. Looking at the facts, however, FTSE 100 companies do not necessarily offer the “safest” investment. Especially for the bullish-minded traders. Many of the biggest names have had a miserable year. These include companies like British American Tobacco (-50% in 2018), Vodafone (-35%) or Barclays (-25.9%).
Broadening trading horizons, however, could potentially pay-off. Looking at the FTSE 350 index, which combines the 100 blue-chips and the 250 challengers, paints a clear performance picture.
Only 6 out of the 20 best 2018 FTSE 350 performers come from the blue-chip index. These are companies like Ocado (+99%), Evraz (+41%), Pearson (+27%). If you bought any of these shares, well done. If you looked elsewhere, however, your portfolio would have been better off in looking at the mid-caps. In fact, 2 of these FTSE 250 companies (Hikma +51%; Auto Trader +29%) did so well in 2018 that they actually got promoted to FTSE 100 in late December.
So, why not just wait for these companies to get promoted and trade them as part of the FTSE 100? The problem with this approach is that you can’t trade the past. Strong share price moves increased Hikma’s and Auto Trader’s market cap to qualify them for a promotion. There is, however, no guarrantee that the uptrend will continue. By waiting until the last moment to trade the FTSE 100 leaders, investors could be missing the boat.
Many of the biggest share price moves in FTSE stocks occur because of a specific impetuses. These can include quarterly results, profits warnings, geopolitical or macroeconomic events. These events can give shares a long-term momentum, but quite often they remain “in-play” only a short amount of time. Sometimes, these events can become “priced-in” as quickly as several hours.
Our job here at Accendo is to inform our clients as soon as these events occur. If you open and fund an account with us, we’ll send you the best trading opportunities daily. And we cover all major stocks, whether on the FTSE 100, FTSE 250, DAX, Dow or any other big market.
2018 has been a rollercoaster year for many investors and plenty of traders have been disappointed by their returns. However, if your risk appetite allows it, even this kind of environment had plenty of opportunities to trade. Bullish or Bearish, we would highlight it for you and give you all the tools you need to benefit.
It’s early to take full advantage of out service and trade the full length and breadth of the financial markets. Just click here to subscribe to our Gold Pass and start receiving our daily trade opportunities directly into your inbox.
Sam Springett, Trader, 20 December 2018
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research