Analysts left red-faced as most popular FTSE 100 stocks suffer steep losses in

Analysts covering the London market’s blue-chip stocks may have been left feeling a little sheepish at the end of 2020 as new data showed FTSE 100 firms with the highest level of ‘buy’ ratings suffered losses in value beyond that of the index as a whole during the year.

Stockbroker AJ Bell, compiling data from Sharecast and Refinitiv, highlighted that the FTSE 100 stock most popular among analysts, () with 92% of brokers rating them at buy, saw total returns for 2020 decline by 25.8%, much lower than the FTSE 100 as a whole which fell 11.5%.

Similarly, the second-highest rated stock, NMC Health with 90% buy ratings, was eventually suspended from trading and delisted amid allegations of fraud.

Other high-rated shares on the market also saw steep declines, British Airways owner SA (), rated 83% at buy, fell 61.4% over the year, while telecoms giant () dropped 12.2% in value.

The only firms in the top 10 FTSE 100 names to offer a positive return for 2020 were clothing retailer (), which was rated 78% at buy and saw a return last year of 2.7%, and packaging group () which increased 21.8% in value with 80% of analysts rating the group at buy.

‘Sell’ rated stocks upend the consensus

By contrast, some of the worst rated blue-chip firms among analyst coverage managed to pull off positive performances in 2020.

B&Q owner (), rated 67% sell by analysts, saw a return of 24.6% in 2020 as its fortunes were boosted by a boom in home DIY during the UK’s lockdowns.

Meanwhile, insurance firm PLC (), with 50% rating at sell, managed a positive return of 33.4%, although the biggest surprise was online grocery firm (), which managed a return of 78.8% despite 50% of ratings at sell as the pandemic caused demand for delivery services to soar.

These surges among the stocks least favoured by analysts effectively upended the consensus, with stocks carrying the most sell ratings offering a positive return of 6.5% for 2020 compared to the 21.1% loss for the most favoured companies.

Cut analysts some slack, says investment director

While the numbers may indicate that those monitoring the markets for a living may not be earning their keep, AJ Bell investment director Russ Mould said “some slack must be cut” for analysts given the “fiendishly difficult” nature of 2020.

“Stocks collapsed in the first half of the year only to rally hard in the second and in many cases macroeconomic trends, such as the pandemic, recession and Governments’ and central banks’ policies trumped bottom-up, ‘micro’, company-specific developments”, he said.

However, Mould also pointed that this isn’t the first time analyst predictions have fallen short, with the top picks in 2015, 2016, 2017, and 2018 also failing to beat the performance of the wider index.

He added that as a result “contrarian” investors may be concerned that heading into 2021 the brokering community is now rating 52% of FTSE 100 stocks at buy, the highest since AJ Bell began the survey six years ago.

“What this does go to show is that anyone prepared to pick their own stocks rather than pay a fund manager or index-tracker fund to do it for them simply must do their own research on individual companies they even think about buying or selling any of its shares. At best, broker research may be a useful filter or a cheeky contrarian indicator which only confirms legendary investor Warren Buffett’s old maxim that ‘you cannot buy what is popular and do well”, Mould said.