UK Barometer: August 2021

UK small and mid-cap stocks have continued this year's strong run in August

James Gard 2 September, 2021 | 9:07AM
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Barometer showing changeable weather

Every month we look at how the stocks in the Morningstar UK Index have performed according to size and investing style. Despite a mid-month wobble, UK stocks had a decent month in August, putting in the best performance this year since April, helped by a wider rally in global markets. It was a positive month for all categories but small-cap value stocks were the standout with a gain of more than 7% in August alone. 

Small-cap stocks were the best performers across value, growth and blend investing styles with gains of 7.12%, 6.41% and 6.99% respectively in Augusr. This compares favourably with large-cap stocks in August, which gained 1.17%, 4.24% and 1.56% across equivalent categories. While the large caps have done well this year, UK small and mid-cap companies have excelled in share price terms during the economic recovery, pushing their respective benchmarks to record highs in recent weeks. In the year to date, small-cap blend and growth stocks are the best performers too with gains of 30% and 22% so far. There are 29 stocks within the small-cap value category and they are some of the most economically sensitive in the index. Many household names like Dixons Carphone (DC.), The Restaurant Group (RTN), Halfords (HFD) and JD Wetherspoon (JDW) are tied to the fortunes of the British consumer, who so far has splashed out this year, according to retail sales figures. Whether this momentum can continue as coronavirus cases rise into the winter remains to be seen.

Large Cap Value Underperforms

The weakest performing category last month was large-cap value, which contains 17 stocks with a heavy weighting in the FTSE 100. These include companies like BHP (BHP), which is planning to move its primary listing from London to Sydney and other large resource companies like recent stock of the week Rio Tinto (RIO), Glencore (GLEN), Royal Dutch Shell (RDSB) and BP (BP.). All these shares boast double digit returns for the year to date as the commodities complex booms, but BHP investors have reacted negatively to the potential FTSE 100 exit. This large-cap value group is a mixed bag in terms of monthly performance but Tesco (TSCO) is one of the biggest gainers in August amid the Morrisons-centred buyout interest in the supermarket sector. Morrisons (MRW) itself, which agreed a near $10 billion takeover by CD&R in August, is the best performer this year in the mid-cap value category. Sainsbury’s (SBRY) could also be in the frame as the next private equity target, according to Morningstar retail analyst Ioannis Pontikis. Its shares rose 7% in August and are up 38% so far this year.

2021 vs 2020

How does this year stack up so far against 2020 in terms of category performance? Last year small-cap growth stocks were far ahead of any other category with a gain of nearly 40% in the full year. But small-cap value stocks, bore the brunt of the coronavirus sell-off though, with a loss of 22%. With eight months of the year done, all index categories are in positive territory, with most posting gains of between 14% and 22%.

But the standout category is small-cap blend with a rise of just over 30%. Small-cap blend is the second largest category in the Morningstar UK Index with 63 stocks; the biggest is mid-cap blend with 66 stocks. While the (unweighted) average share price gain this year is 18%, there are some seriously impressive gains within this group, most notably Daily Mirror publisher Reach (RCH), whose shares are up nearly 200% this year. The second best performer this year with a gain of 100% has been marketing agency Next Fifteen Communications (NFC), on the back of strong financial results. Mid-cap stocks of all types are up 19% so far this year, according to Morningstar data.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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James Gard

James Gard  is senior editor for


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