Which UK stocks have done best since Pfizer Monday?

“It is almost exactly a year since Pfizer’s announcement that it had successfully trialled a COVID-19 vaccine that it had joint developed with BioNTech and the news changed the outlook for the global population and financial markets alike. Rather ungratefully, investors have not looked to buy pharmaceutical companies, despite all of their hard work – AstraZeneca’s 10% gain over the past year leaves it ranked 450th out of nearly 600 firms in the FTSE All-Share – and in many cases stocks that did well in the pandemic have since done badly while many that did badly have done well,” says AJ Bell Investment Director Russ Mould.

“Investors have tended to look for those firms whose business models were most badly hit by the pandemic, lockdowns and recession, because they had the greatest recovery potential and had suffered share price collapses.

“They have in many instances shunned firms whose business models were ideally suited to keeping us fed, clothed and in contact, on the grounds that their shares had done brilliantly and become expensive and that it would be hard for them to maintain the sales and profits momentum they had generated while everyone was hunkering down at home.

Source: Refinitiv data

“Certain special situations feature in the list of the twenty best performers, such as bid candidates Meggitt and U and I, but a lot more are firms who had a rough time during the pandemic and are looking to bounce back better. They includer retailers Greggs and Watches of Switzerland, oil firms Tullow Oil and EnQuest, construction specialists Kier and Galliford Try and a whole host of travel-related companies, including airport services specialist John Menzies, trains-to-buses firm FirstGroup and cruise ship operator Saga.

“Online retailers AO World and Ocado have gone from winners to losers, as many firms whose business models were thought to be, and proved to be, reliable even during lockdowns and a sudden, sharp recession – these include London Stock Exchange, Pennon, Homeserve and Avon Protection. In some – but not all – of these cases, investors may have mistaken relative reliability and predictability for safety. By dint of their very strong share price performance, and thus their lofty valuations, these stocks actually became less safe as they offered less downside protection should anything unexpected go wrong on a market-wide or company-specific basis, as seems to have happened at Avon Protection for one.

“Also among the biggest losers are the miners Petropavlovsk, Polymetal, Centamin, Fresnillo and Hochschild. Presumably investors feel that havens such as precious metals are no longer required and that neither are their producers, although in many cases these firms are very profitable, producing cash and paying dividends.

“There are no guarantees that the performance trends of the last 12 months will continue but at least these trends give investors an idea of what is being priced in – an economic recovery, but one where inflation does not get out of hand.

“If it turns out that central banks are not ahead of the curve but behind it, and on the verge of a policy mistake by letting monetary policy run too loose for too long, owners of real assets like gold and silver mines could yet enjoy a return to favour as could online retailers, if their valuations become attractive enough or – perish the thought – a new variant of the pandemic sweeps the country.

“Equally, expensive defensives and firms whose business models are relatively immune to the vagaries of the economic cycle – utilities, telecoms, pharmaceuticals and consumer staples – could return to favour if the economy falters, either because of inflation, tax rises or the toll taken by the debt burden accrued during the pandemic, especially if central banks do feel obliged to tighten monetary policy more quickly than markets currently anticipate.”