FTSE 100 – the winners & losers of 2023
2023 witnessed a 1% gain for the FTSE 100, after a strong start. But beneath the surface some stocks saw some impressive moves.
The Risers – Rolls Royce and Marks & Spencer
2023 witnessed FTSE 100 members Rolls Royce and Marks & Spencer round off the year as the strongest performers, up 223% and 114% respectively.
Rolls Royce
In 2022, Rolls Royce successfully turned its fortunes around and achieved profitability and positive cash flow after facing significant challenges during the pandemic. This positive outcome has instilled confidence in the company's management, who have issued an optimistic outlook for 2023.
The recovery of the travel industry post-pandemic has led to an increased demand for aircraft engine servicing and maintenance, which is a major source of profit for Rolls Royce. This has provided strong support for the company's large civil aerospace business.
Under the leadership of CEO Tufan Erginbilgic, Rolls Royce has strategically restructured its operations to focus more on engines, power systems, and defence. This shift towards higher growth and higher margin areas has been well-received by stakeholders.
Rolls Royce has successfully executed its plans to divest non-core assets and reduce costs in order to navigate the challenges faced by the aviation industry. These efforts have paid off and contributed to the company's return to profitability.
The markets are optimistic about Rolls Royce's future prospects, particularly due to the expected growth in defence spending and the company's expertise in specialty power systems for emerging sectors like sustainable energy. This presents significant upside potential for the company.
Technical analysis on the Rolls Royce share price
The Rolls Royce share price is currently seeing an exponential rise with it trading at levels last seen in June 2019 with the May 2019 peak at 324.50 pence representing the next upside target.
The next higher February 2019 high at 344.40p may also be reached during 2024, ahead of the company’s August 2018 high at 379.00p.
The strong medium- to long-term uptrend will technically remain intact while the Rolls Royce share price stays above its October low at 196.45p.
Rolls Royce Weekly Candlestick Chart
Marks & Spencer
M&S's strong Christmas sales performance is a positive sign for the company's turnaround efforts under CEO Stuart Machin. Both the clothing & home and food divisions performed well, indicating that the company's strategies are resonating with customers.
One area where M&S has made significant progress is in controlling costs. By implementing supply chain efficiencies, closing stores, and reducing headcount, the company has been able to improve its profit margins. This cost management is crucial for M&S's overall financial health.
The online grocery joint venture with Ocado has been a success for M&S, with the partnership expanding and sales density increasing. This partnership provides M&S with a valuable growth avenue in the competitive online grocery market.
In terms of macroeconomic resilience, M&S's positioning as a value/discount retail option could work in its favour during a recession. If consumers trade down from higher-end retailers, M&S may be able to hold up relatively well, providing some insulation from economic downturns.
Furthermore, M&S has strengthened its balance sheet by raising over £500 million in 2022 through the sale of underperforming international operations and the withdrawal from the Russian market. This move enhances the company's financial stability and allows it to focus on its core operations.
Technical analysis on the Marks & Spencer share price
M&S’ share price has this week risen to a 3 ½ year high whilst targeting the May 2018 to February 2019 highs at 292.90p to 302.80p.
The medium-term uptrend will remain valid while the M&S share price stays above its late November low at 246.4p on a weekly chart closing basis.
Marks & Spencer Weekly Candlestick Chart
The Fallers
At the other end of the scale, the biggest fallers were Anglo American and Fresnillo. Both miners suffered heavily, and struggled to recoup lost ground, even with a big rally for precious metals in November and December. Anglo American fell 48% and Fresnillo dropped 37% as of 13 December.
Anglo American
The drop in prices for commodities such as iron ore, copper, and coal in 2023 has had a negative impact on Anglo mines' revenue and profitability outlooks. This decline in prices has reduced the near-term earnings potential for the company.
The mining sector is facing concerns about weakening global growth, high inflation, and potential recessions. These factors are weighing on the demand and pricing for Anglo's commodity exposures. As a result, the company may experience a decrease in demand for its commodities, which could further impact its profitability.
Although inflation has eased somewhat, it remains stubbornly high. This has led to increased input costs for energy, labour, and materials related to Anglo's mining operations. As a result, the company's profit margins have been compressed.
Anglo heavily relies on China as a major commodities importer. However, China's post-COVID recovery has been uncertain, and its growth outlook is also uncertain. This clouds the demand projections from one of Anglo's key markets, further adding to the challenges faced by the company.
Technical analysis on the Anglo American share price
Anglo American’s share price has taken it to a an over 3 ½ year low at 1,630p in early December before trying to regain some of its recently lost ground.
The August to early-November lows at 1,952p to 1989.8p represent the nearest resistance zone and as long as the next higher November high at 2,314.50p isn’t overcome, the share’s long-term downtrend will stay intact.
A fall through the 1,630p low would lead to the September and November 2018 lows at 1,529.8p to 1,433.6p being eyed.
Anglo American Weekly Candlestick Chart
Fresnillo
Fresnillo has been grappling with rising production costs, primarily driven by inflation in energy, labour, and materials. This, combined with a decline in metals prices, has put significant pressure on the company's profit margins.
In addition to cost-related challenges, Fresnillo has also encountered difficulties in its production processes. The company had to revise its full-year production guidance for 2022 due to lower ore grades and delays in development projects. These issues raise concerns about the company's ability to achieve growth targets.
One particular risk that Fresnillo faces is its heavy reliance on assets located in Mexico for its operations. Recent discussions around nationalization policies, potential tax changes, and security challenges in Mexico have brought these risks to the forefront. These uncertainties add another layer of concern for the company's future prospects.
The recent recovery in silver prices may help the shares to rebound in 2024, though it must be noted that silver remains flat for the year while gold has gained 11%.
Technical analysis on the Fresnillo share price
Fresnillo's share price has been in a long-term bear market since September 2020 and is currently hovering above its 3 ¾ year low, made at 499.30p in August.
A possible weekly chart close above the 597.80p September high and 610.60p February 2022 low may lead to the July 2022 low at 637.20p being revisited. It and the July peak at 615.40p would need to be overcome, though, for a medium-term bullish reversal to gain traction.
Were the bear market to continue, though, and the August low at 499.30p to give way, the March 2020 low at 456.50p could be revisited.
Fresnillo Weekly Candlestick Chart
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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