What a difference a year can make! In 2020, the best-performing FTSE 100 stock was Ocado (LSE: OCDO), the e-grocer known for delivering its own and Marks & Spencer products. But in 2021, it has managed to make it to the list of worst-performing FTSE 100 stocks up to 20 December, a recent ranking by Interactive Investor showed.
What happened here?
The Ocado stock price is down by more than 26%, a decline smaller only than that of Flutter Entertainment and Melrose Industries. It is not hard to see why the stock is down. Last year, it was on fire as we went into lockdown for the first time. Only a handful of stocks gained as this occurred. These included those that found themselves positively impacted in an otherwise difficult time. Think of e-commerce companies, delivery services and paper and packaging providers. One of them, of course, was Ocado. The stock quickly surpassed its pre-market crash highs in 2020, to actually double in value from these levels by August last year.
Cut to today, and the gains have all but disappeared. It is now trading at almost the same levels as it was pre-pandemic. When news of vaccine development came out, stock markets rallied, but it was bad news for Ocado stock. It fell soon after, and even though it did rise a bit on more bad news about coronavirus early in the year, it quickly resumed its slide. It has been pretty much downhill since.
Why it was my FTSE 100 pick for 2021
I could see the risks to the stock in 2020. Yet it was my pick for 2021. There were two reasons for this. If Covid-19 had continued to have a hold over our lives this year, who was to say where the stock might have reached by now. Also, I still like it from a long-term perspective.
Whether or not Covid-19 lasts much longer, one thing has become quite clear. We are now in a time when e-commerce is a more dominant choice of shopping in our lives than it has ever been. For a while I thought I was only a convert as far as large grocery orders go. But the festive season has made me realise that efficient and well-developed e-commerce solutions can be a big support for all kinds of purchases during such busy times. No wonder forecasts for it are robust.
And Ocado is at the heart of this industry. Its performance has remained quite strong despite the easing in lockdowns. And now Marks & Spencer has also started displaying signs of good financial health, which is good news for it. I bought the stock a while ago, and going by its performance and the industry’s prospects, I think it is a good one for me to buy on the current dip and hold for the long term until the industry has well and truly matured.
Manika Premsingh owns Ocado Group. The Motley Fool UK has recommended Ocado Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
