End of Year Lists: The Best (and Worst) of 2024

2024 – In Lists

It’s the end of the year, which means it's time for lists.  Ever since seeing High Fidelity (based on the Nick Hornby novel) at the cinema as a 16-year-old I’ve loved making them.  And yes, all because the calendar changes at the stroke of midnight on January 1^st doesn’t mean anything has changed but… just don’t be a killjoy.  So, presented for your criticism, here are my professional and not-so-professional top 5s from 2024. 

 

Top 5 Things That Made Us Happy (aka: we got these right):

1. Overweighting banks – domestic UK banks, in particular, are beginning to benefit from what should be a multi-year profit uplift from their structural hedge book. With robust capital positions and a reasonably healthy demand environment, they should continue to be able to return excess cash to shareholders through share buybacks.  Even after its share price has nearly doubled this year, NatWest still only trades on a consensus estimated 2025 PE of less than 8x.
2. This is not just a retail stock, this is an M&S retail stock – after more than doubling in 2023, Marks & Spencer has continued to outperform the market during 2024. The persistence of trends, especially in the retail sector, can often be underappreciated.  M&S has improved its product offering across both its clothing and food divisions and continues to gain market share.  Management say they remain ‘positively dissatisfied’ and still believe there is substantial room for improvement.
3. Go West, young man – while the swathe of companies taking their primary listings to the US is not a particularly positive sign for the UK market, it has benefited a number of our portfolio holdings during the year. CRH, the construction materials business and one of the largest holdings in the UK Opportunities portfolio, has seen its stock re-rate since making the move but still trades at a discount to US peers.  Unless there’s a recognition that changes need to be made, expect many more companies to follow suit during 2025.
4. Take-Outs (the ones we hit) – the UK stock market continued to be a feeding ground for PE-houses and industry-buyers seeking to take advantage of what continues to be, in our view, an undervalued UK plc. Alpha Financial Markets Consulting was acquired during the year while TI Fluid Systems and Spirent have both accepted bids.    
5. Being underweight big oil – for most of the last twenty years big oil has a been an ‘alpha donor’ to the average active manager. However, the conflict in Ukraine changed the dynamic and the stocks outperformed in 2022 and 2023. As conditions have normalised, the underperformance has resumed.

 

Top 5 Things That Annoyed Us (aka: we got these wrong):

1. Not being long Rolls-Royce – while appreciating the tailwinds in the aerospace sector and the galvanising impact of a new CEO, we had concerns about some of the engine issues Rolls-Royce faced and felt that there were better ways to play the sector. We were wrong.
2. Where’s the Industrial Recovery? – following the Covid and Ukraine-induced shocks to supply-chains and inflation, the normal supply and demand cycle had been thrown out of whack. In 2023, many industrial companies and distributors were impacted by destocking.  2024 was meant to be a year of recovery, with this picking up pace as the year progressed.  Except, it hasn’t.  Industrials holdings like Essentra and Morgan Advanced Materials have issued disappointing updates during the second half.  Political uncertainty during the year hasn’t helped, nor has…
3. Rate Cuts…not so fast - … the fact that the rate-cutting cycle has been slower than we anticipated. At the beginning of 2024, consensus expectations were that the BoE would deliver 4 or 5 cuts during the year, taking the base rate at year-end to between 4-4.25%.   Instead, there have only been two thus far with the rate likely to end the year at 4.75%.  This has impacted the more cyclical, interest-sensitive holdings in our portfolio.
4. Take-Outs (the ones we missed) – if somebody had told me at the beginning of 2024 that Wincanton would be subject to a contested bid process leading to it getting taken out at a c.100% premium to its undisturbed share price I wouldn’t have believed them.
5. Irritating left-field nonsense – there are few things more annoying than having an investment play out exactly as intended only for something unforeseen to derail matters. An EU ruling on the labelling of Talc abruptly halted the share price momentum of Elementis, the chemical company.  Still, as everyone knows, when things go right portfolio managers are quick to proclaim their genius.  When things go wrong…well… it’s usually irritating left-field nonsense beyond our control.

 

Top 5 Things We’re Thinking About for 2025:

1. Trump wants MAGA v.2. but can the US outperformance be sustained? – during Joe Biden’s presidency, both the US economy and stock market have outperformed the rest of the developed world. Many of the goals of Biden’s flagship achievements (e.g. the CHIPS act) would appear to fit comfortably into a MAGA-framework.   But will Trump follow through on the tariff and immigration policies he proposed on the campaign trail?  Do we reach a point where investors are spooked by the US’ fiscal profligacy?  Or is the US just so exceptional that it will continue to seem like the only game in town?
2. Does the industrial cycle really have to turn or is this the new norm? – it has become the norm when meeting industrial companies or distributors to ask where volumes are relative to 2019 (i.e. the last ‘normal’ year). The answer is still often a variation of ‘well behind’, which intuitively should provide some comfort on the recovery potential.  But what if the pre-Covid days merely reflected a very different world (interest rates, China) to where we are today?  
3. The effect of Labour’s budget – will it halt the UK’s recovery? – we have long been optimistic about the resilience of UK consumer and economy. A period of greater political stability, moderating inflation, and healthy consumer incomes should all be supportive.  The budget’s increase in business taxes has led to concerns about the outlook for employment.  Is this just post-budget noise which will dissipate in the face of strong fundamentals or something that could have a prolonged impact?
4. Has Europe reached peak pessimism and will the German election be a catalyst? – Germans should be grateful that we don’t have a word for taking enjoyment in someone else’s misfortune. While there are no quick fixes to longer-term challenges like the decline of its automotive industry in the face of Chinese competition, there are relatively straightforward steps that would help revive its moribund economy.  First of these would be loosening the stifling ‘debt-brake’ that limits the state’s ability to stimulate growth.  The present favourite to win February’s federal election, the CDU’s Friedrick Merz, has indicated a willingness to do this. 
5. What will be 2025’s grey swan? - like their black counterparts, grey swan events are unexpected but unlike them, they are predictable.  They are the things that we look back at the end of the year and ask, ‘how did we not see that coming?’.  While the speed of the collapse of the Assad-regime in Syria was stunning, given the extent to which its Iranian and Russian-backers have been stretched themselves in recent years then it shouldn’t have been a total shock.  Are there events in other countries that could prove market-moving?        

 

Top 5 Books of the Year:

1. Demon Copperhead by Barbara Kingsolver – released in 2022, this is Charles Dickens’ David Copperfield reimagined in 1990s rural Appalachia. Despite being fiction, it gives an excellent understanding of how poverty and the opioid crisis have ravaged America.
2. The History of Ideas by David Runciman – a collection of essays by the academic and podcaster showing what thinkers ranging from Rousseau to Nietzche can teach us about how society is structured.
3. How to win an Information War by Peter Pomerantsev – tells the story of Sefton Delmer, a leading figure in the UK’s black propaganda campaign against the Nazis, and shows how his methods can still be used today.
4. Inside Thatcher’s Monetarism Experiment by Tim Lankester - a compelling account of a period where an untested economic ideology met the messy realities of markets.
5. Seasons in the Sun (Britain,1974-1979) by Dominic Sandbrook – I’m very late to the party with this series of British history books. But the level of detail is absolutely fascinating and the comparisons that can be drawn with the present day are mildly concerning.

 

Top 5 Albums of 2025:

1. Charli XCX – Brat
2. MJ Lenderman – Manning Fireworks
3. Nick Cave & The Bad Seeds – Wild God
4. Kim Deal – Nobody Loves You More
5. Godspeed You! Black Emperor – No Title As Of 13 February…

(just missing out: Waxahatchee; The Cure; Hurray For the Riff Raff; Fontaines DC; Vampire Weekend)