UK mid-caps suffered in 2018 as investors nervous about Brexit and slowing growth pulled back from stocks tied to the domestic economy – although not every company in the FTSE 250 left investors nursing heavy losses.
Earlier this week, we looked at the FTSE 100 and showed that online delivery platform Ocado posted the index’s strongest total return in 2018 after rising 98.94 per cent. It was followed by Russian steel miner Evraz (67.77 per cent) and educational content supplier Pearson (30.37 per cent).
In this article, we turn our attentions to UK mid-caps. The FTSE 250 posted a 13.25 per cent fall in total return terms during 2018, underperforming both the FTSE 100 (which was down 8.73 per cent) and the FTSE Small Cap (down 9.52 per cent).
However, not every member of the index made a loss last year. FE data shows 50 companies listed on the FTSE 250 made a total return higher than zero in 2018, while 19 of these made double-digit returns.
Performance of stock over 2018
Source: FE Analytics
At the very top of the table is Plus500, the online trading platform of contracts for difference (CFDs), with its 77.44 per cent total return. Its share price return (so excluding its dividends payouts) was 50.8 per cent.
The firm had a very strong start to 2018 and was up by more than 145 per cent up until early August after the European Securities and Markets Authority said it would investigate CFD providers. Plus500 has supported this move as it would suggest a crackdown on more shady operators in the space.
The stock is owned by the likes of Artemis Strategic Assets, JPM UK Smaller Companies and LF Odey Absolute Return but it’s worth pointing out that it is one of the most-shorted stocks on the market, with 12 companies disclosing to the FCA that they are betting on its share price going down.
Hikma Pharmaceuticals made the FTSE 250’s second highest total return at 54.19 per cent, while its share price appreciation of 51.32 per cent is higher than that of Plus500. The firm was promoted to the FTSE 100 at the end of 2018 after Shire was sold to Japanese pharmaceutical firm Takeda and left the index.
It manufactures non-branded generic and in-licensed pharmaceutical products. Part of its strong 2018 performance can be attributed to it taking advantage of short supplies for injectable opioid painkillers in the US.
The company also started 2019 with the announcement of a deal to sell an injectable anti-viral treatment made by China’s Beijing Sciecure Pharmaceutical in the US market.
Source: FE Analytics
Jardine Lloyd Thompson Group, also known as JLT Group and a provider of insurance, reinsurance, employment benefits advice and brokerage services, appears in third place. The stock jumped in September after it was announced that it was being acquired by US professional services firm Marsh & McLennan Companies (MMC) for $5.6bn.
At the time, JLT Group chairman Geoffrey Howe said: “The JLT board is unanimous that MMC has made a compelling offer which reflects the substantial value created by the extraordinary efforts of our people.
“I'm confident that combining the two groups' strengths will create a business uniquely well equipped to serve its clients in the future. We have long admired MMC and we can think of no better home for our business.”
In fourth place with a 37.96 per cent total return is electrical power generation company Drax Group.
At the start of the year, the company reported that earnings before interest, tax, depreciation and amortisation grew from £140m in 2016 to £229m and said it was making “good progress” on its strategy. It later announced the acquisition of a Scottish Power’s portfolio of pumped storage, hydro and gas-fired generation for £702m.
The fifth-highest FTSE 250 total return last year came from Syncona. This is a specialist healthcare investment trust that invests in “global leaders in life science”; it is trading on a significant premium to net asset value, currently at 17.5 per cent according to AIC data.
Source: FE Analytics
Turning to the FSTE 250 stocks that were hit with the largest falls in 2018, we see that Superdry suffered the most with a 74.70 per cent fall in total return terms.
The fashion group’s share reached a record high in the first week of January but spent the rest of the year heading downhill. During 2018, the company warned that annual profits could fall by up to 40 per cent because of warm weather, political uncertainty and changing consumer behaviour.
That said, Superdry had a last-minute rally after co-founder Julian Dunkerton unveiled a bid to regain control of the company. Dunkerton had left the company in March after 15 years in charge but in December called on shareholders to reinstate him as director.