No Santa rally? There was for these FTSE 100 shares

A handful of mining shares on the FTSE 100 had a Santa rally of their own.

By December, it started to become clear that global markets would not be providing investors with the sort of annual returns that they had become accustomed to over recent years.

The FTSE 100 was no different, entering the month already in correction territory, when measured from its yearly peak.

However, many still hung to the hope of a so-called Santa rally, a historic trend in markets that sees the last two weeks of December provide the strongest returns of the year.

As stockmarket historian Stephen Eckett points out, since 2007 the FTSE 100 index has had a return of 19%, while including just the month of December of each year, the index has cumulatively risen by 26%.

Going back further, the FTSE All-Share index has risen in December in 75% of all years since 1970.

This year, however, the Santa rally failed to materialise, with the blue-chip index shedding a further 5% throughout the month.

Not all shares on the index, of course, suffered the same fate. A handful of mining shares on the FTSE 100 had a Santa rally of their own.

Given the fears over global growth weighing on equity markets around the world, this was not necessarily expected. As Russ Mould, investment director at AJ Bell, notes: “It looks odd, given the prevailing worries over global economic growth, but mining stocks dominated the list of best performers in December.”

Yet, of the top five shares in the FTSE 100 in December, three were mining companies.

The top performer of the month was Fresnillo. The Mexican precious metals miner saw strong share price growth partially as a result of silver’s 8% price surge in December.

At the same time, however, Fresnillo’s strong performance was the result of the company bouncing back from a very low base.

A number of concerns, including the election of left-wing populist Andrés Manuel López Obrador as president of Mexico, weighed on the company’s share price throughout the year. From the start of 2018 to the end of November, Fresnillo was the worst-performing company on the index, declining by around 45% over that time period.

In December, however, the company provided returns of 14.1%. Any investor attempting a Dogs of the Footsie-style strategy would likely have benefited.

Also among the top 10 performers for December was Anglo-American, whose mining operations cover everything from diamonds to iron ore.

The company, notes Mould, announced that output would be higher than expected and costs lower than expected in 2018, while it also flagged further increases in production for 2019 and 2020. As a result, the company’s shares provided a total return of 11.6%.

Finally, resource giant BHP Group experienced the third-strongest performance in December, providing shareholders with a return of 10%. Behind this was the announcement of both a $5 billion share buyback programme and a $1.02 per share special dividend. “This largesse was the result of the company’s $10.8 billion sale of its onshore US shale oil and gas assets to BP back in the summer,” notes Mould.

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