With lockdown restrictions easing today and a heatwave arriving, I wish you a happy Monday. On days like these, it’s easy to be optimistic, but I’m looking back to learn lessons from the past year. One year ago, we witnessed one of the steepest and scariest market crashes. As the FTSE 100 index plummeted, I nicknamed spring 2020 ‘Meltdown March’.
The FTSE 100 climbs and then collapses
On 31 December 2019, the FTSE 100 closed at 7,542.4 points. Before Covid-19 cases dominated the news, the Footsie climbed to its 2020 closing peak of 7,674.6 on 17 January. However, as coronavirus infections multiplied, the UK market first slid and then collapsed. On 23 March 2020, the FTSE 100 had been crushed, closing at 4,993.90. That represented a loss of over 2,680 points since late January. Thus, in mere weeks, the index had collapsed by more than a third (34.9%) from its 2020 high. Crikey.
A year ago was a great time to buy
As Baron Rothschild remarked, “Buy when there’s blood in the streets, even if the blood is your own”. When share prices are slumping, the brave and wise take a deep breath and buy quality stocks. Ultimately, when you take a 20-year view, even the biggest FTSE 100 crashes eventually fade into history.
As the market crashed, I decided to take the plunge. Within days of the low, I took 50% of my family wealth that was sitting in cash and sank it into US and global stocks. Since its closing low of 2,237.40 on 23 March 2020, the US S&P 500 index has soared more than three-quarters (77.6%). Happily, my ‘buying the dip’ proved to be a highly lucrative financial decision. In fact, thanks to my aggressive ‘crash buying’, my wife and I could retire immediately (but we won’t).
I wish I’d bought these cheap UK shares
As I write on Monday afternoon, the FTSE 100 hovers around 6,711.33. That’s almost 1,720 points — more than a third (34.4%) — higher than its 2020 closing low. Hence, my hunch that US stocks would bounce back higher than cheap UK shares after the crash proved correct. Then again, the individual gains of Footsie members have been widely dispersed, with some shooting out the lights. For the record, these are the five highest gainers among FTSE 100 shares over the past 12 months:
Entain (gambling and sports-betting) +206.4%
Weir Group (industrial engineering) +138.1%
Ashtead Group (equipment hire) +132.7%
Flutter Entertainment (gambling and sports-betting) +126.1%
Evraz (steelmaker and miner) +122.3%
As you can see, all five FTSE 100 winners have at least doubled in value in the past 12 months, with Entain (formerly GVC Holdings) more than tripling. Following the imposition of lockdowns, Entain and its rival, Flutter, profited hugely from the shift to online gambling. As a result, both shares have soared spectacularly over the past year.
After more than halving by Meltdown Monday (23 March), Weir Group has rebounded as oil & gas prices have rocketed. Likewise, shares in Evraz (whose largest shareholder is Roman Abramovich, owner of Premier League team Chelsea FC) have shot up as demand for its raw products has recovered.
Finally, could I have predicted any of these super-sized share surges a year ago? I might have done for Entain and Flutter, had I realised that my own shift to online sports betting and poker was happening across the globe. Even so, I’m happy with the decisions I made back then, so I won’t complain!