In January, Morningstar reported on a number of UK stocks that had previously seen poor performance, but which have rallied and shown impressive gains over the last year. The reason for the return of value stocks, they say, is down to monetary tightening and inflation – and with costs rising, companies like banks and energy companies – which make up much of the list – are expected to be able to weather the current storm.
So – which are the top three stocks on the list, and are they worth buying?
- Marks & Spencer
In 2019, M&S actually exited the FTSE for the first time after years of underwhelming performance. With COVID-19 lockdowns giving supermarkets a boost, though, Marks & Spencer has reaped the rewards.
The closure of major M&S stores – as well as significant job cuts at the start of the pandemic – had some worried. In addition, the brand’s clothing sales have been declining, with their lower margin food offering – which has no competitive moat – making up more and more of their sales. CEO Steve Rowe is working hard to turn the business around, but admits that supply chain issues, increased labour costs and more could prove to be major speedbumps.
The BT share price has risen by over 40% since the start of 2020, with the brand’s fibre rollout and inflation-linked contracts aiding their performance. However, The Motley Fool lists both pros and cons of investing in BT.
On the plus side, their rollout of both full fibre broadband and 5G, they say, shows continued growth amidst consumer demand for ultra-fast telecommunications networks. In addition, the company has reinstated its dividend based on recent performance, and has achieved £1bn in cost savings in recent years.
However, BT’s growth forecast is low, and its heavy debt load could be significantly impacted should interest costs rise.
Over the last five years, Centrica stock has lost 70% of its value. However, with gas prices soaring and Centrica enjoying a position of dominance in the UK residential market, its price has been on a steady incline since 2020.
In the last few years, Centrica has streamlined its business and slashed its debt levels, which will no doubt have given some investors increased confidence. However, the gas market is volatile and with residential gas prices continuing to rise, is there any guarantee that Centrica customers will remain with the brand?
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