Stock markets have been a bit more anxious and volatile over the past month. Fears of rising inflation have caused government bond yields to climb. As bond yields rise and prices fall, they look more attractive relative to shares. Thus, highly valued shares — notably US tech stocks — have dropped in value recently. However, the FTSE 100 — which I regard as cheap today — is up by over 165 points (2.5%) since 8 February.
The FTSE 100’s winners
Although the FTSE 100 is up by 2.5% over one month, it includes both winners and losers. Of the 101 shares in the FTSE 100 (one company is dual-listed), 50 have risen in 30 days. The gains from these winners range from 37.0% to 0.1%. Overall, the average rise across all 50 winners is 10% — four times the index’s return.
The FTSE 100’s losers
This leaves 51 losers, whose declines range from 0.1% to 26.6%. The average drop across all 50 losers is 7.2%. That’s 9.7 percentage points below the index return. Across all 101 shares, the average gain was 1.3%. That’s around half of the FTSE 100’s actual return, because of a few heavyweights among the fallers. Let’s take a look at these laggards. These are the FTSE 100’s five biggest fallers since 8 February:
Company | Industry | % Change (30 days)
Smith & Nephew (S&N) | Medical equipment | -12.7%
Fresnillo | Silver & gold mining | -14.3%
Just Eat Takeaway.com (JET)Â | Food delivery | -22.1%
Scottish Mortgage Investment Trust (SMT) | Tech fund | -22.8%
Ocado Group | Online grocery | -26.6%
Three highly rated tech stocks
Let’s look at the FTSE 100’s three biggest fallers first, because they have something in common. All three firms’ share prices command premium valuations, like those enjoyed by highly rated US tech stocks. Ocado has made huge losses over its 21-year life, as it has invested in technology to grow its business. Yet its shares were the #1 performer in the Footsie over the past five years. Having peaked at 2,914p on 30 September 2020, the Ocado share price has since crashed to 2,067p today. That’s a fall of almost three-tenths (29.1%), most of which has arrived in the past 30 days.
UK-listed investment trust SMT is heavily invested in US tech stocks. Its major holdings include Tesla, NIO, and Delivery Hero, all of which have lost substantial value recently. I described SMT as a FTSE 100 bubble stock in mid-January. Its share price has since plunged, crashing by almost a quarter (22.8%) in the past 30 days. Likewise, food-delivery firm JET is another pumped-up pseudo-tech stock that has taken a beating lately. Its shares have collapsed by more than a fifth (22.1%) since 8 February.
Although these three FTSE 100 shares have all dived over the past month, I still would not buy any of them today. Even now, their shares are valued far too highly for me. These three shares are better suited to growth investors, rather than for committed value investors like me.
I’d buy this ‘boring’ quality business
Today, the share I would snap up is surely the most ‘boring’ of the five: medical-equipment maker Smith & Nephew. S&N is a great British business that has been trading since 1856 (165 years). Its leading products for wound management, endoscopies and orthopaedics are sold in over 100 countries. S&N has 17,500 employees and booked revenues of over $4.5bn in 2020. Its share price peaked at