With January underway, we look at two high volume FTSE 100 stocks that you should keep an eye on in the coming months.
In mid-December 2019, Lloyds was worth a respectable 64p per share. But after the pandemic-induced mini-crash, it had collapsed to 25p by September 2020. But after significant volatility, it’s recovering in the new year at 48p.
Commenting on November’s Q3 results, CEO Charlie Nunn said he saw ‘significant opportunities for Lloyds Banking Group to further develop its platforms and capabilities and grow through disciplined investment.’ The bank posted a 96% rise in year-over-year pre-tax profits to £2 billion, as it released £740 million of the £1.2 billion set aside for loan defaults during the pandemic.
The UK’s biggest mortgage lender also increased home loans by £2.7 billion to bring lending for the year to £15.3 billion. Meanwhile, net interest income increased 4% quarter-over-quarter to £2.9 billion, due to this increased mortgage demand. And Lloyds has announced that it’s purchasing 50,000 rental homes over the next ten years, hoping to generate £300 million in pre-tax profit over the decade.
But according to competitor Nationwide, the average house is now worth a record £254,822, gaining a staggering £23,902 over the past year. And the Bank of England has just raised the base interest rate to 0.25% to combat soaring inflation, with further rate rises expected in 2022.
This red-hot housing market is a double-edged sword for Lloyds. On the one hand, it could see rising revenue from higher customer mortgage payments. But on the other, interest rate rises come with the ghosts of defaults, price falls and negative equity. And 2008 isn’t ancient history. By setting out to become a giant corporate landlord, it may be banking too many of its eggs into one average house-shaped basket.
The Vodafone share price hit a five-year high of 237p during January 2018, before the pandemic saw it collapse to 105p in March 2020. By 7 May 2021, it had recovered to 142p but will see out 2021 at 112p.
In H1 FY22 results, revenue increased 5% from €21.4 billion to €22.5 billion, driven by ‘growth in Europe and Africa and a recovery in handset sales.’ After stripping out a one-off profit from the sale of its Australian business, Vodafone’s operating profit increased by €200 million. And CEO Nick Read believes the company now has ‘good sustainable growth and solid commercial momentum.’
However, net debt increased by €3.8 billion to €44.3 billion, due to free cash outflow of €1.0 billion, equity dividends of €1.3 billion, and money spent on share buybacks. While welcome to some investors, this increasing debt leaves Vodafone exposed to the upcoming interest rate rises in 2022.
But access to the EU’s €750 billion Pandemic Recovery Fund will allow the telecoms giant to strengthen its presence across Europe. And with €150 billion of the fund earmarked for an EU-wide commercial digital transformation, Vodafone could profit as companies spend their funding hiring out its expertise.
Meanwhile, Vodafone’s FinTech venture in Africa, M-PESA, now serves over 49 million customers. With the continent key for ‘commercial momentum,’ the growth opportunity is immense. And it’s bringing back roaming charges for UK customers, potentially generating more income at home.
With institutions owning 87% of the company’s shares, the group appears to have significant upside potential. And with sky-high volume and volatility, it’s a FTSE 100 stock to watch in January 2022.