10 FTSE 100 shares with the strongest momentum

The UK’s premier index has been one of the world’s best performers in 2022, but some blue-chips are doing better than others. Stock screen expert Ben Hobson finds 10 of the best.

One of the standout themes in the stock market this year has been the resilience of Britain’s FTSE 100. In the face of spiralling inflation, economic headwinds and war on the edge of Europe, the blue chip index has held firm.

With just a few weeks to go until the end of the year, UK large-caps are staging a late rally that small- and mid-cap indices are struggling to mimic. So for those thinking about which way markets will turn in 2023, it could be worth looking at what has made the FTSE such a dependable option this year.

A solid performance from defensive sectors

On a 12-month basis, the FTSE 100 is slightly up at just over 7,500 points. In previous years, investors might have felt short-changed by that kind of result. But in 2022, it’s a return that has beaten almost all other world stock market indices, as well as many other asset classes.

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Back in February, the FTSE hit a one-year high of 7,672 points. Eight months later, in October, it had fallen to a year low of 6,826. That was a drawdown of -11.0%. But since that low, the index has climbed its way back to par, which captures the general sense of resilience in the index this year.

One factor that propped up the FTSE 100 when the market went risk-off in early 2022 was its relatively heavy weighting to natural resources sectors. Oil and gas and mining were among the rare winners when markets took fright.

Oil and gas shares such as Shell (LSE:SHEL) and BP (LSE:BP.) suffered badly during the Covid lockdowns in 2020 but rebounded well last year. Supply shocks in global energy markets in 2022 saw valuations soar across the sector. Shell shares are currently up by 36.5% over the past 12 months, and BP shares are up by 32.8%.

Events in the oil and gas sector were a classic illustration of how macro and geopolitical factors drive the performance of energy shares. Unlike sectors that depend on healthy country economies, oil and gas stocks tend instead to be influenced by global supply and demand.

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It was a similar story with some of the FTSE’s biggest mining shares. Here, worries about inflation and rising interest rates were not the major concern, so the sector held up well.

Shares in Glencore (LSE:GLEN) have soared by 51% over the past year, with shares in Rio Tinto (LSE:RIO) up 16.8% and Anglo American (LSE:AAL) up by 9.9%.

A boost from the strong US dollar

Part of the reason why natural resources and commodity sectors have done so well is that many of them generate sales in US dollars. The exceptionally strong dollar against the pound this year proved to be an earnings boost for those generating revenues abroad. In fact, that tailwind was felt across the index, with an estimated 70% of revenues coming from outside the UK.

It isn’t just natural resources and commodity sectors that give the FTSE some protection. Unlike American indices such as the S&P 500 and the Nasdaq, where technology has dominated in recent years, the FTSE is much more defensive.

Faced with rising inflation and economic uncertainty at home, defensive sectors have done well this year. One of those is healthcare. Here, the largest stock in the FTSE 100 in terms of market cap is AstraZeneca (LSE:AZN) , a £173 billion giant that has seen its shares rise by 37% in 2022.

Likewise, utilities stocks like National Grid (LSE:NG.), SSE (LSE:SSE) and Centrica (LSE:CNA) have resisted the volatility seen elsewhere. So too have a number of consumer defensives, ranging from Unilever (LSE:ULVR) (+5.8%) to British American Tobacco (LSE:BATS) (+28.9%).

Screening for FTSE momentum

With all this in mind, which FTSE 100 shares are currently doing the best job of building momentum? One of the more popular technical approaches to finding shares on the move is to look for those with prices that are trading ahead of their 200-day moving averages.

Moving averages (like the 200 day MA) work by cutting out the noisy day-to-day price movements that might hide the underlying price trend. It works by plotting the average share price over the past 200 trading days. When the current price is ahead of that 200 day MA, then the share is technically in an uptrend.

These are the kinds of shares you might want to watch if you’re looking for companies that are resisting economic uncertainty.

This screen looks for FTSE 100 shares that are trading at least 5% ahead of their 200 day MAs. It also looks for positive relative price strength (meaning that they have outperformed the index) over the past month, past three months and past 12 months. Here are the results:

In terms of sectors, the results deliver a diverse set of shares - but there are only about 20 shares in total that manage to pass these rules. Flutter Entertainment (LSE:FLTR), the sports betting and gaming group, has seen the strongest price move overall - but it’s also the most expensive on a price-to-earnings basis, with a P/E ratio of 54.9x.

Another consumer cyclical leading the list is Burberry Group (LSE:BRBY), the luxury fashion brand that has seen its shares perform strongly since the autumn.

Mining is a continuing theme, with Fresnillo (LSE:FRES), Glencore (LSE:GLEN), Antofagasta (LSE:ANTO) and Rio Tinto (LSE:RIO) making the list. Note the eye-catching dividend yield at Glencore of 8.0%, which reflects expectations that strong profits this year will eventually flow to shareholders.

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Overall, the defensive nature of the FTSE has served investors well in 2022. In part that has been down to relatively large weightings to sectors that have benefited from unusual global supply shocks and are insulated from domestic economic headwinds.

But other factors have helped too. Companies in the index tend to be large, resilient and well financed, with major exposure to foreign markets and international revenues. They are likely to be better placed to absorb the pressures of high inflation and a possible economic slowdown.

While some indicators suggest that inflation could moderate next year, it seems likely that economic pressures will remain. Given its steadfast performance in 2022, keeping an eye on momentum in the FTSE 100 could be a worthwhile endeavour in the search for safety in the year ahead.

Ben Hobson is a freelance contributor and not a direct employee of interactive investor.