Best performing FTSE 100 shares

In the UK, Ocado has been the stand-out performer, and after sealing a deal with the US grocery giant Kroger, the online supermarket has thrust its way into the FTSE 100.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Its meteoric rise has inflicted serious pain on the hedge funds who bet against it, and they will still be licking their considerable wounds.

“Deal-making is definitely a wider theme within the best performers on the UK stock market so far this year, with Smurfit Kappa, Sky, Tesco and Sainsbury’s all seeing some M&A activity.”

Earlier this year, Sky successfully negotiated the auction of Premier League TV rights, but it’s a bidding war between Fox and Comcast which has really set the share price alight. Fox has now “switched from predator to prey”, with Disney and Comcast doing battle for the US media company, and for Sky by extension, Khalaf said.

“Sky’s share price now stands around £2 higher than the £12.50 Comcast offer on the table, so the market is clearly expecting even more blockbusting bid action,” he added.

Elsewhere in the list of top performers, Tesco completed its takeover of Booker in March, and Sainsbury’s announced plans to merge with Asda in May. The Sainsbury’s tie up with Asda is yet to be given the green light by the competition authorities, but if it goes ahead it could spark another price war in the sector, Khalaf predicts. “That’s great if you’re a consumer, but potentially damaging for shareholders”, he said.

The analyst said that the grocery sector has held up reasonably well in the storm currently buffeting the UK high street, and the strong share price performance of Sainsbury’s and Tesco reflects a reappraisal of prospects for supermarkets after a tough 2017.

“General retailers have not fared so well in the high street turmoil, but Next investors have had a very pleasing year so far, as the clothing chain has bucked the retail trend and beaten admittedly low expectations,” he added.

^{Source: Bloomberg to 28/06/2018}

Worst performing FTSE 100 shares

A profit warning and a CEO resignation has dampened the Micro Focus share price. The shine has also come off Standard Life Aberdeen following last year’s merger, Khalaf said.

“A shock sale of the Standard Life insurance business to Phoenix was not enough to bolster the asset manager after it transpired that one of its customers, Lloyds Banking Group, is taking its ball away to play with some new friends. Unfortunately for Standard Life Aberdeen, that ball is worth around £109bn of assets under management.”

House builders have also been weak this year, though they still keep churning out pretty decent results, according to Khalaf.

He said: “After a strong run, the market has been waiting for that Wile E. Coyote moment when the sector looks down and sees nothing but thin air, and price performance this year suggests there is a gathering perception that moment is now approaching.

“Things are starting to look more challenging for the house builders, though insatiable housing demand, low interest rates, and the Help to Buy scheme still provide some supportive footholds.”

^{Source: Bloomberg to 28/06/2018}