The 10 long and 10 short FTSE 100 momentum picks selected at the end of 2014 looked as though they could prove a very risky bunch of stocks. That's because so many of them seemed to have their prospects firmly pinned to future commodity price movements. Almost all of the shorts were shares in companies that had suffered severely due to the commodity price falls experienced in the final quarter of 2014. Meanwhile, many of the longs were shares in companies that looked likely to benefit from commodity price weakness through falling input costs. While these thematically-focused momentum portfolios have both underperformed the FTSE 100 (performed worse than the index in the case of the longs and better in the case of the shorts), the overall outcome has not been too painful considering the single-mindedness of the stock picks.
As it turned out, the oil theme was not the key issue that caused the underperformance. In the case of the longs, it was two retail-related stocks that were the major disappointments (Dixons Carphone and Associated British Foods), while the shorts really came undone due to the massive outperformance of one of the only stocks in the portfolio for which commodity prices were not the overriding concern, Tesco (see table). Overall the longs were up 10.3 per cent compared with 11.2 per cent from the index, while the shorts were out in front with a 14.8 per cent gain.
LONGS | SHORTS | ||
---|---|---|---|
Name | Capital return (15 Dec 14 - 5 Mar 15) | Name | Capital return (15 Dec 14 - 5 Mar 15) |
International Consolidated Airlines Group | 22.9% | Tullow Oil | 2.7% |
Barratt Developments | 19.1% | Weir | -0.4% |
Friends Life | 16.0% | BG | 17.8% |
Taylor Wimpey | 15.2% | BHP Billiton | 24.5% |
Sage Group | 11.5% | Tesco | 47.7% |
Carnival | 8.2% | Standard Chartered | 16.1% |
easyJet | 7.4% | Anglo American | 7.8% |
Associated British Foods | 0.9% | Smiths Group | 15.2% |
TUI AG | 0.7% | Intertek | 16.1% |
Dixons Carphone | 0.7% | Glencore | 0.4% |
Average | 10.3% | - | 14.8% |
FTSE 100 | 11.2% | - | 11.2% |