Interactive Investor

The 50% Club: these bombed-out cyclicals repay investors with massive rally

24th November 2022 15:34

by Graeme Evans from interactive investor

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In October, we highlighted some of 2022’s biggest fallers that might do well when the stock market recovery begins. Well, the timing was perfect and many of these shares have rocketed in value.

Market rally concept 600

A raid on the 50% Club of bombed-out cyclical stocks has produced stunning results for bargain-hunting investors who noted our article highlighting the lowly plight of Marks & Spencer Group (LSE:MKS), Persimmon (LSE:PSN) and other established names.

That piece on 11 October turned out to be particularly well timed, as the next day signalled the start of a market recovery that means some stocks in the 50% Club have since surged by as much as 70%, with the mid-cap FTSE 250 index up 18%.

Having been 41 strong at the time of our article, the number of stocks in the FTSE 350 that are still down by more than 50% so far in 2022 has been whittled down to 17 by last night’s close.

Stocks no longer in the 50% Club include pubs chain Mitchells & Butlers (LSE:MAB), Barratt Developments (LSE:BDEV), M&S and the serviced offices business IWG (LSE:IWG).

The diminishing membership of the 50% Club reflects hopes that interest rates may not rise as far as originally feared, particularly after US inflation came in below expectations and ministers boosted the pound by pledging to restore the credibility of UK public finances.

A softening in bond yields on both sides of the Atlantic has particularly helped the appeal of technology stocks, meaning the Cazoo and Trustpilot investor Molten Ventures (LSE:GROW) has rallied by 72% and grocery warehouse technology business Ocado Group (LSE:OCDO) is up 67%. However, the severity of their earlier sell-offs ensures both stocks remain in the 50% Club.

Housebuilder Persimmon is also still there, despite adding more than 15% since mid-October as investors revised their worst-case fears over a house price crash for the sector.

The return of the average five-year mortgage rate to below 6% has helped, while analysts note that balance sheets are significantly stronger in this cycle than the 2008 financial crisis.

That should provide some protection for dividends in a sector where the current average yield stands at around 6%. Other building firms on the front foot since our article include Barratt and Vistry Group (LSE:VTY) after gains of 24%, while Countryside Partnerships (LSE:CSP) has recovered by 20% to also exit the 50% Club.

NamePrice (p)Share price change
since 12 October (%)
Share price
change in 2022 (%)
Molten Ventures (LSE:GROW426.6p71.9-58.1Investment Banking and Brokerage Services
Ocado Group (LSE:OCDO)661.3p67.3-60.6Personal Care, Drug and Grocery Stores
Synthomer (LSE:SYNT)147.5p63.8-63.1Chemicals
Wizz Air Holdings (LSE:WIZZ)2180.5p56.3-47.9Travel and Leisure
Liontrust Asset Management (LSE:LIO)1135p52.7-48.4Investment Banking and Brokerage Services
Jupiter Fund Management (LSE:JUP)127.6p49.2-50.2Investment Banking and Brokerage Services
Aston Martin Lagonda (LSE:AML)132.375p45.1-73.6Automobiles and Parts
IWG (LSE:IWG)164p43.8-43.6Industrial Support Services
IntegraFin Holdings (LSE:IHP)296.9p42.1-47Investment Banking and Brokerage Services
Mitchells & Butlers (LSE:MAB)143.7p37.6-43.9Travel and Leisure
Marks & Spencer Group (LSE:MKS)127.675p34.8-44.8Retailers
Moonpig Group (LSE:MOON)170.95p33.6-54.4Retailers
Future (LSE:FUTR)1584p32.8-58.6Media
Carnival (LSE:CCL)740.5p32.7-46.5Travel and Leisure
IP Group (LSE:IPO)68.175p29.3-44.9Investment Banking and Brokerage Services
ASOS (LSE:ASC)673.75p28-71.8Retailers
Marshalls (LSE:MSLH)292.1p27.1-57.8Construction and Materials
Barratt Developments (LSE:BDEV)407.75p24.1-45.5Household Goods and Home Construction
Vistry Group (LSE:VTY)656.25p24-44.6Household Goods and Home Construction
Ferrexpo (LSE:FXPO)148.8p20.9-50.3Industrial Metals and Mining
Bridgepoint Group (LSE:BPT)214p16-56.6Investment Banking and Brokerage Services
Persimmon (LSE:PSN)1330.75p15.5-53.4Household Goods and Home Construction
International Distributions Services (LSE:IDS)242.7p14.2-52Industrial Transportation
888 Holdings (LSE:888)101.85p12.8-66.2Travel and Leisure

Source: SharePad as at close of play on 23 November 2022.

JD Sports Fashion (LSE:JD.) is also no longer on the list as investors have been tempted back to the retail sector on hopes that supply chain and inflation pressures are easing. Consumer confidence remains near record lows but is a little stronger than the levels seen at the time of September’s mini-budget.

JD shares are still 41% lower for the year, a recovery of sorts that reflects the support of several City “buy” recommendations and the “ongoing resilience” shown in September’s half-year profits of £383.5 million.

The trainers and sportswear business stood at 233p last November but fell below 90p on 12 October before a recovery of around 40% to 126p since then.

Future (LSE:FUTR) is another of 2021’s crop of strong performing stocks to have fallen back in spectacular fashion. The publisher behind magazines including Country Life and FourFourTwo has rallied by a third in the past six weeks but is still down 60% this year.

Aston Martin Lagonda (LSE:AML) tops the 50% Club leaderboard, even though shares have risen 45% since mid-October. The luxury car maker is down 74% this year, having tapped investors for £654 million through a discounted fundraising in September.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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