Sector Screener: a review of 2024
A lot of sectors have done very well this year. Others have struggled. Analyst Robert Stephens rounds up the action and looks ahead to what 2025 might have in store.
24th December 2024 08:44
by Robert Stephens from interactive investor
Sector gains
The FTSE 350 index’s 5% gain during 2024 masks what has been a huge variance in performance across its wide range of sectors. At the very top of the leaderboard are the Telecommunications Equipment sector and the Leisure Goods sector, which have generated gains of 46% and 44%, respectively, since the start of the year.
Those two sectors currently have only three members between them, namely Spirent Communications (LSE:SPT) (Telecommunications Equipment), Games Workshop Group (LSE:GAW) (Leisure Goods) and ME Group International (LSE:MEGP) (Leisure Goods). Therefore, both sectors are highly concentrated relative to many other FTSE 350 sectors and could be subject to heightened volatility in future.
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The Aerospace & Defence sector, meanwhile, has risen by 37% year-to-date. It was featured in ii’s Sector Screener column in March, with its seven members, which include Rolls-Royce Holdings (LSE:RR.) and BAE Systems (LSE:BA.), experiencing buoyant operating conditions in the recent past due largely to changing attitudes towards defence spending among the governments of major economies.
Indeed, 23 NATO members are expected to meet the target to spend 2% of GDP on defence this year. This is over three times the figure from 2022. With geopolitical risks remaining elevated in the Middle East and Ukraine, while the world economy’s growth prospects are set to gradually improve amid monetary policy easing across major developed economies, the outlook for the sector remains upbeat.
Tobacco is the fourth-best sector of 2024. It featured in this column in January and has gained 34% year-to-date after falling by 27% in the previous year. The sector is relatively concentrated with only two members - British American Tobacco (LSE:BATS) and Imperial Brands (LSE:IMB) - and appears to have gained in popularity this year due in part to their low valuations compared with the wider index, plus significant dividends.
Clearly, the transition to reduced-risk products could prove to be somewhat challenging and regulatory risks remain present. However, it would be unsurprising for recent positive trends towards the tobacco sector to persist based on the wide margins of safety offered by both of its incumbents.
Sector declines
While some sectors posted exceptional gains in 2024, others endured a far more difficult year. The three worst-performing sectors in the FTSE 350 were Automobiles & Parts, Personal Goods and Chemicals. While none of them have previously been covered in ii’s Sector Screener column, the fourth-worst performing sector, Real Estate Investment Trusts, was discussed at the end of 2023.
It has declined by 14% in 2024, with interest rates that stood at a 16-year high until August prompting difficult operating conditions for members such as British Land Co (LSE:BLND) and Land Securities Group (LSE:LAND). And while the Bank of England’s recent interest rate cuts could help to catalyse commercial property valuations, the existence of time lags means that it could prove to be a somewhat prolonged process.
Still, the valuations and yields of several sector incumbents suggest they offer good value for money on a long-term view. As monetary policy easing gradually prompts higher demand within the sector, it could deliver significantly better performance than it has done in 2024.
Likewise, falling interest rates should have a positive impact on the Household Goods & Home Construction sector. It has declined by 12% year-to-date and, while it has not featured in the Sector Screener column this year, it was previously discussed in September 2023.
It has experienced a difficult year because the housebuilders that dominate the sector, such as Persimmon (LSE:PSN) and Bellway (LSE:BWY), have endured tough operating conditions. With many of them having large landbanks, solid financial positions and trading on low valuations, however, their long-term prospects appear to be positive amid an improving economic outlook.
Performance (%) | ||||||
Rank | Top FTSE 350 sectors in 2024 | Price | One-month | 2024 | 2023 | 2022 |
1 | Telecommunications Equipment | 574 | 5.6 | 45.5 | -52.6 | -5.8 |
2 | Leisure Goods | 34,746 | 13.4 | 44.4 | 12.6 | -14.1 |
3 | Aerospace & Defence | 11,764 | -5.3 | 37.0 | 67.6 | 22.6 |
4 | Tobacco | 35,030 | 9.4 | 33.7 | -26.5 | 21.7 |
5 | Construction & Materials | 12,448 | -1.2 | 33.5 | 35.9 | -18.7 |
6 | Banks | 4,851 | 5.3 | 31.7 | 12.0 | 7.9 |
7 | Consumer Services | 4,756 | 2.5 | 26.3 | 11.9 | 16.1 |
8 | Investment Banking & Brokerage Services | 14,349 | 3.4 | 26.1 | 16.0 | -22.0 |
9 | Travel & Leisure | 9,304 | 7.2 | 23.7 | 21.1 | -18.7 |
10 | General Financial | 17,555 | 4.5 | 20.0 | 26.5 | 0.0 |
11 | Media | 13,243 | 1.5 | 18.9 | 22.7 | -7.0 |
12 | Nonlife Insurance | 3,969 | 11.5 | 18.3 | 0.1 | 2.0 |
13 | General Industrials | 7,750 | 2.4 | 14.1 | 12.1 | -14.4 |
14 | Precious Metals & Mining | 11,128 | 1.0 | 12.4 | -11.2 | -43.3 |
15 | Personal Care, Drug and Grocery Stores | 4,492 | 2.7 | 12.0 | -2.7 | -5.9 |
16 | Software & Computer Services | 2,695 | 9.3 | 11.5 | 36.7 | -20.8 |
17 | Real Estate Investment & Services | 2,524 | 8.0 | 9.2 | 9.1 | -34.9 |
18 | Food Producers | 7,928 | -3.2 | 8.2 | 29.2 | -15.7 |
19 | Telecommunications Service Providers | 2,042 | -0.3 | 7.1 | -10.7 | -25.8 |
20 | Closed End Investments | 12,282 | 1.0 | 6.5 | 2.4 | -20.3 |
21 | Support Services | 11,088 | -2.4 | 4.9 | 6.4 | -23.7 |
22 | Electronic & Electrical Equipment | 10,368 | 5.2 | 4.1 | 15.1 | -28.5 |
23 | Pharmaceuticals, Biotechnology & Cannabis Producers | 20,215 | 3.3 | -0.4 | -3.5 | 12.0 |
24 | Health Care Providers | 10,668 | 2.1 | -0.9 | -1.4 | 32.4 |
25 | Industrial Transportation | 3,936 | -12.9 | -1.2 | 14.9 | -25.1 |
26 | Retailers | 2,537 | -4.3 | -2.7 | 32.4 | -34.0 |
27 | Gas, Water & Multiutilities | 5,950 | -2.0 | -2.9 | 8.2 | -4.9 |
28 | Oil & Gas Producers | 7,974 | 0.3 | -7.1 | 5.7 | 41.8 |
29 | Electricity | 10,237 | -3.8 | -7.2 | 3.3 | 5.8 |
30 | Medical Equipment and Services | 5,029 | 6.0 | -7.3 | -0.6 | -6.8 |
31 | Industrial Engineering | 13,158 | 10.2 | -7.6 | 3.0 | -25.5 |
32 | Industrial Metals & Mining | 6,297 | 3.7 | -7.7 | -12.9 | 23.1 |
33 | Sector Beverages | 20,510 | 4.6 | -8.8 | -19.2 | -10.5 |
34 | Life Insurance | 5,693 | 5.8 | -8.8 | -11.4 | -7.8 |
35 | Household Goods & Home Construction | 11,516 | -2.2 | -12.1 | 32.0 | -44.4 |
36 | Real Estate Investment Trusts | 2,074 | -4.6 | -13.6 | 7.6 | -35.6 |
37 | Chemicals | 7,317 | -3.8 | -23.7 | -18.3 | -29.0 |
38 | Personal Goods | 15,925 | 28.4 | -26.6 | -29.5 | -14.3 |
39 | Automobiles & Parts | 1,155 | 17.7 | -27.3 | 6.7 | -59.0 |
Source: ShareScope on 11 December 2024. Past performance is not a guide to future performance.
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