As we all know, there were some significant events in the world which have impacted everyday life in the UK. These issues included the continuing effects of Brexit, a global pandemic leading to a potential economic recession and a rise in energy prices due to political unrest in the Middle East. All these factors have contributed to a decrease in consumer confidence and investment activity in the UK stock market, causing it to decline sharply.
Despite this downturn, many investors managed to make smart investments and turn a profit in the UK stock market in 2022. Those who took advantage of the volatility and investigated how to buy shares were able to capitalize on short-term gains, while those with more conservative outlooks chose to hold onto their stocks for longer-term gains.
Here we run through the top-performing stocks in 2022, and it will be interesting to see if they manage to see similar success into next year and beyond.
Pearson, an educational publishing group, had its shares rise by 53% due to takeover offers from US private equity firm Apollo and positive momentum within the company, as the new CEO’s strategy started to show results. The business also experienced margin improvement. In recent years, Pearson has struggled as the US education sector shifted online but has now found success selling directly to consumers.
In a year marked by conflict in Ukraine and its global repercussions, it is not surprising that investors sought out opportunities in the defense sector. As a leading player in this industry, BAE Systems was a popular choice for those looking to invest in a company with the potential for significant growth in future earnings. BAE’s strong performance in terms of trading and improved profit margins contributed to this demand. In November, the company announced that many of the countries in which it operates had either already increased or were planning to increase defense spending. These factors, along with steadily improving earnings forecasts for 2022 and 2023, helped drive a 51% increase in BAE’s share price.
Centrica, the parent company of British Gas, had its shares rise by 33% due to rising energy prices throughout the year. According to Refinitiv data, earnings per share estimates for the company have increased by 200% since the start of the year. Strong performances from Centrica’s electricity and gas production businesses and its energy trading division led the company to raise its profit guidance on November 10th towards the higher end of market expectations.
Shell has benefited from the increase in energy prices resulting from the conflict in Ukraine and has largely maintained its gains despite recent weakness in oil prices. Analysts predict that Shell’s ongoing capital discipline and high commodity prices will lead to strong free cash flow generation, enabling further buybacks into 2023.
Shares in Imperial Brands rose by 30%, outperforming the FTSE 100. Investors were attracted to the company’s strong cash generation and pricing power. Imperial Brands, which produces cigarettes and vaping products, including Davidoff, Gauloises, Lambert & Butler and blu vape, gained market share in its top five priority tobacco markets under the leadership of CEO Stefan Bomhard. The company’s five-year strategy also contributed to improved operational performance. In addition, Imperial Brands initiated an ongoing, multi-year share buyback program, in addition to the ordinary dividend and continued investment in the business’s competitive positioning.
Kosmos, a US-based oil producer with a primary listing in New York and a secondary listing in London, had a successful year in 2022 due to rising energy prices and strong operational progress across its portfolio assets in West Africa, Latin America and the US. The company reduced its debt from $2.5bn at the beginning of the year to $2.1bn by the end of October, funded by strong cash flows from the Jubilee and TEN fields offshore Ghana. Kosmos Energy has indicated that this debt reduction may allow it to initiate a new shareholder return program in the second half of 2023, with investment bank Berenberg suggesting a preference for share buybacks over dividends.
The City of London remains one of the world’s leading stock markets and there are always going to be opportunities for investments. If you want to make a stab at buying some stocks you could do a lot worse than backing some of the best performers in the UK stock market from 2022.