Rebound and debt decide the year's ups and downs

Some FTSE-listed companies were better prepared or simply better placed to benefit from what the stock markets threw at them. Nikhil Kumar reports

It has been an eventful 12 months on the markets, with investors trying to get a handle on the recovery and fretting about Europe's sovereign debt issues. So, with just days to go until 2011, here is a list of the best and worst performing blue-chip stocks so far this year.



GOOD YEAR ...

Weir Group

Scotland-based Weir group is set to take the crown as the best-performing FTSE 100 stock of the year, vaulting by nearly 150 per cent as the world economy recovered from recession. The engineering group makes pumps and valves for the oil and gas, power and mining industries, and has benefited as its customers recovered over the past 12 months. Mining, for example, proved supportive as commodity prices rebounded and miners increased their capital expenditure, driving business for Weir. Similar factors boosted business in other segments, ensuring a stellar year for the Weir share price.



ARM

Gadget lovers are responsible for driving ARM's share price. The Cambridge-based chip maker has long been hailed for its technology, which drives mobile phones, both the simple and smart varieties, around the world. Though that might be considered lucrative enough, the ARM investment case received a further boost from the growth in tablet devices, the best known of which is Apple's iPad. ARM is widely believed to have supplied some of the underlying technology inside the iPad, and analysts have been busy crowing about the prospects for fat royalties as more and more people go from typing on keyboards to touching backlit screens. Bid chatter has provided an additional source of support, with Apple and Intel often being mentioned as potential predators. And last week, the stock was boosted by talk that Microsoft was working on a new version of Windows for the sort of devices powered by ARM chips.



Fresnillo

Pull up one chart of Fresnillo's share price and another tracking the silver price. Superimpose one on the other and the reasons for the Mexican silver producer's rally suddenly become clear. The stock is heavily geared to the silver price, which breached the $30 an ounce mark at one point this year. The spike was down to a variety of factors. Precious metals in general regained their lustre as investors sought a hedge against the threat of inflation and mounting economic woes, while silver in particular also benefited from a pick-up in industrial demand. The metal comes in handy in manufacturing a variety of products, from batteries and ball bearings to water purifiers and photovoltaic cells.



GKN

The aircraft parts maker took off as the aviation market recovered, boosting demand in North America and Asia. The company's automotive division has also been doing well as car sales bounced back. Earlier this month, the stock enjoyed some healthy gains after the release of some new US vehicle sales data, which showed a 17 per cent jump in sales in November over the same month a year earlier.



Burberry

Retailers spent much of the past year trying to regain their composure after enduring one of the worst slumps in living memory. But while the wider sector is slightly lower, Burberry stood out for excelling by reshaping its business and reinvigorating its brand. As Seymour Pierce said in a recent note to clients, Burberry, whose share price has more than tripled from its lows two years ago, is now "operationally unrecognisable" when compared with its pre-crisis state. Product sourcing has been overhauled, the number of distribution depots has been slashed from double to single digits, and new IT systems mean that management can better plan where to channel stock. The company has also been tightening its grip on the brand, for instance by terminating certain licensing deals and taking ranges back in house.



IMI

IMI has only just made it on to this list. Although the engineering group, which makes things such as valves and heating and air conditioning equipment, has long been destined to go down as one of the year's best performers, it only secured a blue-chip berth in the last index review. Like Weir and GKN, its rise is broadly down to the pick-up in industrial activity around the world. The company has also been securing future growth via well received deals such as the Zimmermann & Jansen buy in October and a Chinese nuclear joint venture earlier this month.



Petrofac

Save for the summer of uncertainty caused by the Gulf of Mexico oil spill and its implications for other projects around the world, the oil services sector has done well this year as activity picked up and crude prices staged a rebound. But Petrofac shone brighter than its peers, drawing steam from diverse international operations and an ever-expanding order book. Analysts are almost universally positive on the business, which has posted a series of reassuring updates throughout the year. Some have made lukewarm noises about the valuation, but that has not stopped investors, who have continued to pile in, no doubt lured by the consistently strong performance and the promise of continued growth.



Antofagasta

Like Fresnillo, the reasons for whose rally stem, broadly speaking, from the jump in silver prices, Antofagasta has drawn support from the revival in the copper market. Analysts frequently single out the Chilean miner as among those most geared to the ups and downs of the copper price. And this year, prices have shot up, driving up Anto's shares by more than 60 per cent. A revival in world demand and growing confidence among investors, not to mention the prospect of a supply deficit in coming years, have underpinned the rise. Some are evening hailing a new "super cycle" of persistent price rises.



Wolseley

At first glance, Wolseley, the plumbing materials company active both here and across the pond, might seem like an odd winner. After all, the housing market on both sides of Atlantic has proved uncertain at best and downright disappointing at worst. But Wolseley drew strength as the market warmed to its self-help efforts. The company was hit hard during the slump as its end markets collapsed and investors were spooked by its pile of debt. But chief executive Ian Meakins has so far proved a charm for the shares, focusing on making Wolseley a leaner, better functioning machine by doing things such as implementing cost cutting measures and selling its Irish branch network.



Aggreko

Aggreko's bank of generators provides temporary power to drive large-scale projects, make up for emergency outages or fulfil shortfalls in the event of a surge in demand in different parts of the world. The market is projected to grow strongly as the Western world returns to a firmer footing and emerging markets ramp up growth. Eyeing this, analysts have been busy pushing the shares, which have also benefited from a string of positive updates. Although held back now and again by bouts of profit taking, it is set to end the year in the FTSE 100 top 10.





BAD YEAR ...

Resolution, the Clive Cowdery led insurance buyout vehicle, is set to take the FTSE 100 wooden spoon after falling more than 30 per cent during the past 12 months. The market was cautious about the stock amid speculation that, following the acquisition of Friends Provident and Axa's UK life business, the company may be eyeing a third big-ticket deal. The other financial sector loser was HSBC, in sixth place, which lost favour as investors shunned banks amid an escalation in Europe's sovereign debt woes.

The second-worst stock of the year was BP, which should surprise no one given the beating it took as it battled to plug the oil leak in the Gulf of Mexico earlier this year. Marks & Spencer is on track to be the third-worst blue chip of 2010, while sector peer Next stands at number 10.

BAE Systems, hit amid worries about the impact of defence budget cuts, also features on the list of laggards, as does National Grid, which fell sharply in May after announcing a surprise £3.2bn rights issue.

From the pharmaceuticals sector, we have GlaxoSmithKline at number eight, while Vedanta Resources, the Indian miner which has had an eventful year, is flying the flag for the commodities sector, standing at number nine. First, Vedanta failed to win approval for its controversial bauxite mining project in India's Orissa state, and then it announced a foray into the oil business by striking a deal to seize control of Cairn India, the Indian arm of the FTSE 100 listed oil group Cairn Energy. The latter deal is still awaiting clearance from Indian authorities.

Capita's share price was doing fine in the run up to the general election as investors bought in hopes of higher outsourcing volumes as the Government took an axe to departmental budgets. But caution set in after the Cabinet Office stepped in to stop rival group Serco from sharing pricing pressures with its suppliers and, shortly afterwards, Capita, which stands at number seven from the bottom, issued an interim management statement warning that second-half sales would be hit by government spending cuts.

The winners and losers are based on prices at the close on Thursday, 23 December, according to Bloomberg data.

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