Last week wasn’t great for the FTSE 100. The index fell almost 2% over the five days, but not every stock lost ground. In fact, 30 stocks rose, but some more than others.
I’m going to review the three best stocks of last week to see if any of them are still buys for my portfolio.
The FTSE 100 leader of last week
The stock that outperformed all others last week was Royal Mail (LSE: RMG). I last wrote about RMG here. As a quick recap, I thought the company was a great way to gain exposure to the e-commerce market, was attractively valued and with a good dividend yield.
Well, after a near 15% rise in the share price last week, is it still a buy?
Royal Mail’s half-year report was released last week, and it was very good in my view. Revenue continued to grow and adjusted operating profit rose to £404m, up from £37m from the equivalent period a year ago.
There was also a commitment to return £400m to shareholders; £200m in a share buyback to commence immediately; and a £200m special dividend to be paid alongside the interim dividend.
There are still risks to consider here. Staff shortages across the economy might make it harder for RMG to hire seasonal workers over the festive period. Added to this is wage inflation that may impact margins. I still think Royal Mail is a buy for my portfolio though, based on these results.
A FTSE 100 takeover target
The second-best performer was Avast (LSE: AVST). The share price rose about 6.5% last week. There isn’t much to consider here because the company is undergoing a merger negotiation.
The cybersecurity software company announced in July that it was in advanced discussions over a possible merger with NortonLifeLock. The share price rallied over 18% on the news of the potential deal.
One further development last week was announced regarding satisfying a key US regulatory condition. This made the merger more likely to be approved, so the share price rallied.
I don’t have an interest in buying the shares here. The merger is very likely to go through, and I don’t see a competing bidder getting involved at this stage.
A leading technology stock
The final top performer in the FTSE 100 was Sage (LSE: SGE). The share price rose over 6% on the week. The company has performed well so far this year, with the share price up 37%. But over recent years, Sage and its accountancy software have been subject to intense competition. This has meant the share price hasn’t progressed too far in about five years.
The company released its full-year results last week, which caused the share price to rise. Recurring revenue increased ahead of its initial expectations, and the business ended the year with strong momentum. Guidance for next year is for recurring revenue to grow again by about 8% to 9%. This is respectable growth, but I’m not sure it’s high enough given that the price-to-earnings ratio is above 34.
I view Sage as a quality business, with high margins. But I’m wary of intense competition in its sector. I’m putting it on my watchlist for now.
Dan Appleby has no position in any of the shares mentioned. The Motley Fool UK has recommended Avast Plc and Sage 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.
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