Interactive Investor

Global Financial Crisis: best shares to own 13 years after the low

9th March 2022 13:08

Graeme Evans from interactive investor

On the 13th anniversary of the lowest point of the great recession, we name the stocks and markets that have done best since.

War and stagflation fears behind recent selling have left investors looking for a bottom of the market, just as they did 13 years ago today during the Global Financial Crisis, or GFC.

As it turned out, 9 March, 2009 represented the best buying opportunity for a generation after the FTSE 100 index more than doubled over the following decade to set a new record closing high of 7,877 in May 2018. The intraday high, set at the same time, stands at 7,903.

Cheap money fuelled the buying frenzy as central banks introduced ultra-supportive monetary policies to support the global economy after the shock of the 2007 credit crunch and near collapse of the banking system.

Nowhere was this risk-taking appetite more evident than in the tech-laden Nasdaq, which despite recent turbulence stands 1,170% above its level on 9 March 2009.

From just above 3,500, the FTSE 100 index is currently up by a more modest 97% due to London’s reliance on old economy stocks in banking, commodities and utilities. However, the 220% total return still represents a decent performance for investors.

The best current top flight stock since that March 2009 low point has been plant hire firm Ashtead Group (LSE:AHT), whose share price is up 13,700% on the back of its exposure to economy-boosting  infrastructure projects in North America and in its home market.

Another UK-listed stock to crack the US has been retailer JD Sports Fashion (LSE:JD.), which is the second biggest riser on our FTSE 100 list after jumping 4,520%. London Stock Exchange Group (LSE:LSEG), Barratt Developments (LSE:BDEV) and Legal & General Group (LSE:LGEN) are among the more established names on the blue-chip list, which also includes Tesla backer Scottish Mortgage Investment Trust (LSE:SMT).

London’s top flight had been as high as 6,732 in the summer of 2007, prior to a liquidity crisis that sparked the demise of Lehman Brothers in the US and led to Northern Rock becoming the first UK bank in 140 years to suffer a run on its assets.

There had been nine banks in the FTSE 100 in March 2007, which according to the Guardian accounted for 21% of the value of the FTSE 100 as easily the largest sector.

Bradford & Bingley and Northern Rock were subsequently fully-nationalised, HBOS bought by Lloyds TSB and Alliance & Leicester acquired by Santander of Spain.

By March 2009, and with Lloyds Banking Group (LSE:LLOY) and Royal Bank of Scotland majority-owned by the taxpayer, banks accounted for only 8.5% of the FTSE 100 worth a combined £85.5 billion.

The road back has been far from easy, with the squeeze on margins caused by ultra-low interest rates, compounded by the ripping up of banking rules and regulations to ensure lenders do not take the same risks that led to the 2007 financial crisis.

Lloyds is no longer taxpayer-backed, but its army of retail investors have grown weary waiting for Britain’s biggest lender to come close to the expectations contained within a raft of City “buy” recommendations and price targets.

The shares were up 93.6% between 9 March 2009 and last night, compared with 168% for Barclays (LSE:BARC) as its rival benefits from keeping hold of its investment banking operation. HSBC Holdings (LSE:HSBA) is 55% higher and NatWest Group (LSE:NWG) up by just 4% as its continued part-Government ownership limits the potential for shareholder returns despite a market-leading capital buffer.

Even though the banking sector has disappointed since 2009, investors have generated some big returns in other sectors. One of the most popular stocks in this period has been Games Workshop (LSE:GAW), which has turned fantasy miniatures into a business worth £2 billion.

The shares are up more than 3,500% as the third-best-performing stock in the FTSE 250, behind Howden Joinery (LSE:HWDN) and window products business Tyman (LSE:TYMN). China-focused biopharma HUTCHMED (China) (LSE:HCM) and Judges Scientific (LSE:JDG), the instruments business, have been the best performers in the AIM junior market, up 5,570% and 8,130% respectively.

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.