2020 has been a devastating year for many FTSE 100 shares. But when I look round the list of winners, I see a surprising number doing well. Here I examine three to see why they’re climbing, and probe whether they’re still good buys.
Winning FTSE 100 shares
As a customer of Screwfix and B&Q, I’ve always liked Kingfisher (LSE: KGF). As an investment, I think of it as reasonable but nothing special. In recent years, earnings have been declining. And the company pared the dividend right back after Covid-19 arrived.
But so far in 2020, the Kingfisher share price is up 24%, while FTSE 100 shares overall are still sitting on a 16% loss. That’s a cracking outperformance (though it is the least impressive of the three I’m looking at today). It’s all down to a surge in DIY activity during our various lockdowns. I can hear the voices of spouses across the country: “No, you’re not allowed to go to the pub, so you can finally put those shelves up.”
Forecasts suggest a 40% rise in earnings this year. There’s a fall-back expected next year, of 15%, which is the opposite direction to most FTSE 100 shares. But that would still leave the shares on an undemanding P/E of 12. So is this a one-off, or is Kingfisher back to long-term earnings growth? I need more time to tell.
A lockdown blues winner
Flutter Entertainment (LSE: FLTR) shares have more that doubled the gains made by Kingfisher. It’s no real surprise that the gambling company, formed from the merger of Paddy Power and Betfair, has done well this year. (“The shelves? Yes, as soon as we’ve had the Kempton 2:15 results.“)
In this case, we’re looking at a year-to-date gain of 51%. That’s more than three times the average of FTSE 100 shares this year. The Flutter share price actually crashed harder than the FTSE 100 in March. So anyone who managed to buy around the bottom is sitting on a 150% gain.
Again we’re seeing a forecast EPS rise, of 45%, followed by a smaller decline (6%) next year. The 2021 forward P/E stands at 30. Is that still attractive for a FTSE 100 company that I feel has significant growth potential? I think it might be.
Top FTSE 100 share price
The biggest rise among these FTSE 100 shares comes from Ocado (LSE: OCDO). Is it an online groceries retailer, or is it a jam-tomorrow high-growth technology firm? At the moment, with a year-to-date gain of 70%, Ocado is valued as the latter. Oh, and the company is performing like the latter too, making no profits.
With no profits, it’s hard to put any objective valuation on Ocado. And while that’s the case, I think a classic growth share boom-and-bust cycle could be emerging. It’s usually more prevalent with smaller companies, but it does happen among FTSE 100 shares too.
The Ocado share price might have rocketed in 2020. But it has already retreated 25% from its peak price in September. And the vaccine boost enjoyed by many FTSE 100 shares is having the opposite effect on Ocado. I think Ocado is overpriced, and I wouldn’t buy.