Investment company abrdn’s Interactive Investor (II) has compiled a list of the top five performing UK shares from the FTSE All Share index in February.
And one principle followed many investors is that momentum in business operations and stock prices can continue for a long time. These stocks went up last month, but will they continue to outperform? Here’s what I think.
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Takeover talks
The biggest riser last month was Hyve, up by 40.5%. The company earns its living organising international exhibitions and conferences.
On 21 February, the directors announced a preliminary and conditional takeover offer from Providence Equity LLP proposing 105p per share. And as I write, the shares are just above 103p.
I’m not interested in playing that remaining 2p per share because of the risk of the proposed deal falling through. So, for me, Hyve is an ‘avoid’ right now.
But II reckons global consulting and engineering company John Wood Group went up by 37.9%. And the company revealed on 22 February it has received three unsolicited, preliminary and conditional proposals to buy the business. And the most recent proposed a cash offer of 230p per share.
The stock’s near 2017p today. But as with Hyve, I’m not interested because of the downside risk if all the interest comes to nothing. So, for me, John Wood is another ‘avoid’.
Strong business recovery
The third highest climber in February was Rolls-Royce Holdings, the UK engineering company and aero engine manufacturer. The stock shot up by 37.1%.
On the 23rd of last month, the company issued a robust set of full-year results and an enthusiastic outlook statement. And that was just what the share price needed. Meanwhile, City analysts have pencilled in an uplift in earnings of just above 50% for 2024. And set against that expectation, the forward-looking earnings multiple is just below 23.
That’s not a cheap valuation, but Rolls-Royce has recovered its mojo. So I’d put the stock on watch and look out for a good-value entry point.
The fourth best-performing stock was Oxford Biomedica, up 29.1%. And this one’s a serially speculative integrated cell and gene therapy company with zero profits.
The stock made steady progress through the month on little news. But on 20 February, the company announced its new chief executive, Dr Frank Mathias, due to start on 27 March. But this one’s not for widows and orphans because profits are nowhere in sight. However, it’s okay for some fun money for those so inclined. I’d put it on watch for the time being.
Fast growth
Meanwhile, at number five, Darktrace made steady progress to rise by 25.6%. It trades as an autonomous cyber security artificial intelligence (AI) company. And it hit first profits in the trading year to June 2022 with a rapid escalation expected in the current year.
February’s news flow contained a couple of product release announcements. And today’s half-year report and outlook statement is robust. Meanwhile, City analysts expect earnings to rise by around 40% in the trading year to June 2024.
But with the share price near 268p today, the forward-looking earnings multiple is sitting near 48. So fast growth looks baked-in to the valuation. And for that reason, I’d put the stock on watch for the time being while looking for a better-value entry point.
