Statistics analysed by AJ Bell suggest December is historically the best performing month of the year and chances of a seasonal rally in the FTSE 100 are high.

A Santa Rally is always referred to by commentators as we move towards the end of the year, and for good reason. Since the FTSE 100 was established in 1984, the index has returned over 2% on average in December.

Indeed, the majority of December trading periods since 1984 have produced positive returns.

“If you want to know why markets talk about the Santa Rally, that’s why – because the numbers back it up. Thursday got the month off to a slow start but investors can be forgiven for hoping for a little seasonal cheer after the FTSE 100 has spent all year huffing and puffing to a rise of around 2% (albeit with dividends and in some cases buybacks on top),” said Russ Mould, AJ Bell investment director.

AJ Bell analysts compiled data on the best performing Decembers and compared to the following year’s performance. There have been very few negative Decembers since the FTSE 100’s inception in 1984 and all but one negative December was followed by a positive return in the following year.

Although a negative December is usually followed by a positive year, there is no real indiction of what will happen in the next year based on December’s performance.

“The Santa Rally is not certain to offer anything more than festive cheer because it does not seem to be a reliable indicator for the following year,” Russ Mould said.

CORA GOLD (AIM: Cora) 4.4p Mkt Cap £13m has for most of 2022 been steadily moving from speculative exploration to producing gold, but the price is only just off its year’s low. The recent ‘grown-up’ news flow was Optimised Project Economics (OPE).

This technical report follows the announcement of Maiden Reserves and completion of a Definitive Feasibility Study  for its flagship Sanankoro Gold project  in southern Mali. There are a lot of numbers in the OPE, based on a gold price of US$1,750/oz) and Maiden Probable Reserve of 422koz @ 1.3 g/t Au. 

This extrapolates to a 53% IRR, a 1.22year payback and $234m Free cash flow for the life of the mine. There is significant potential 3x upside from Exploration Targets estimated to contain between 26.0 Mt and 35.2 Mt with a grade range of 0.58 – 1.21 g/t Au for a potential 1,370koz Au. This could be a 1-2m oz mine and so worth considerably more than its current market cap. Its long-term backers Lionhead confirmed continued support and is in discussions for a term sheet for up to US$30m for project financing which should further the progress. 

The FTSE 100’s housebuilders took a slowing UK housing market in their stride on Thursday with Persimmon, Barratt Developments, and Taylor Wimpey all rising on the day.

Housebuilding shares gained despite UK house prices falling 1.4% in the month to October as the pressures of a cost of living crisis and fallout from the mini-budget hit activity.

The FTSE 100’s housebuilders are down heavily this year after much of the bad news on UK housing was largely priced in before the market started to deteriorate.

“Housebuilder shares, already heavily beaten down this year, were higher on the Nationwide data and even estate agents like LSL Property Services and Foxtons were only a smidge lower. This shows how the market has already priced in a lot of bad news regarding the property market,” said AJ Bell investment director Russ Mould.

A Fed pivot?

The FTSE 100 started the day on the front following comments from the Federal Reserve chair that raised hopes the US central bank was considering slowing the pace of rate hikes.

After a year of sharp interest rate hikes, the Federal Reserve could be about to amend the trajectory of their rates hikes which current sees a terminal rate of 5% in 2023.

The prospect of easier monetary conditions will be welcomed by the markets who are facing a slowing global economy.

The S&P 500 was up around 3% overnight and the FTSE 100 was trading at 7,580 at the time of writing.

Mixed commodities

Commodity shares were mixed as investors attempted to gauge news flow in China and whether the authorities could be about to end their zero-covid policy.

The FTSE 100 miners were weaker after a strong couple of weeks, and Shell and BP fell on lower oil prices.

The FTSE 100 has outperformed many major indices in November and will have likely helped the valuation of many UK investor’s portfolios.

While the capital appreciation will be more than welcome given the uncertain backdrop, there are still a number of FTSE 100 dividend payers that could be considered for an income as we move into 2023.

Legal & General

Legal & General pays a very attractive 7.4% dividend, even after rallying over 25% since lows in October. Legal & General was a major casualty of Kwarteng’s doomed mini-budget and felt the pressure of disruption in the bond market. At 200p, Legal & General was trading at the lowest levels since 2020 – and didn’t stay there for long.

Legal & General provided a reassuring trading update in October highlighting the impact on their business wasn’t anywhere nearly as bad as their share price suggested.

With Legal & General shares now at 255p, the stock is well below recent 310p highs and is fairly valued at 7.8x earnings.

GSK

It’s very difficult to get excited about GSK, formerly known as GlaxoSmithKline. But dividend payers shouldn’t really be that exciting. Glaxo shares have been stuck in a range for years. The stock bottoms around 1,200p-1,300p then rallies to the 1,800p region, before falling back. At 1,412p today, GSK shares are towards the bottom of this range and the 61.25p per share dividend promised for 2022 FY would mean a yield of 4.3%.

GSK is a quarterly dividend payer and tends to pay its largest dividend in the 4th quarter – which historically has had an ex-dividend date in February.

Persimmon

Persimmon is a high risk dividend play. It is likely to cut its dividend in the coming year, should the housing market slow as predicted by many experts. Last year’s dividend payouts would mean Persimmon yields 18%, but this should be ignored as Persimmon are very unlikely to pay this again in the coming year.

Nonetheless, Persimmon have been a fantastic dividend payer since the financial crisis and any weakness in the share price caused by an impending recession may be an opportunity to buy in anticipation of an economic recovery. Not for the faint of heart.

Are Tesla shares a buy after their sharp fall? The Tesla share price has cratered in 2022 and investors may be eyeing Elon Musk’s EV company as a potential bargain.

Tesla has been a favourite among investors positioning themselves in a stock that will benefit from the electric vehicle revolution, and push towards cleaner forms of fuel.

For years Tesla was the only real pure-play EV company and built a loyal base of investors. Tesla shares soared as a result. However, these lofty valuations were tested by traditional manufacturers entering the EV market in a big way, and Tesla shares very quickly looked expensive around $400. A global monetary policy tightening cycle meant their frothy valuation was no longer sustainable.

With Tesla shares more than halving since, the focus should now be on whether the current valuation is justified by Tesla’s earnings.

Tesla sales

Tesla is no longer a company that should be priced on what it may do years into the future. The company operates in a developed EV market which accounts for 17.8% of new car registrations in Europe, 22% of cars sold in China in October were electric.

Although Tesla is top selling EV brand globally, Tesla is not the top selling EV brand in China, the world’s largest auto market.

Tesla have been around long enough to establish a foothold in the market and should be judged by current sales activities. Year-on-year revenue growth of 56% in the third quarter is impressive, but significantly below the 80% growth recorded a couple of quarters ago.

Traditional car manufacturers – and new entrants – are materially increasing their EV sales and rapidly stealing Tesla’s market share.

Indeed, the extensive ranges of EVs manufactured by traditional car companies means it is also appropriate to make valuation comparisons to peers such as BMW, Volkswagen and Toyota. 

Tesla shares valuation

Volkswagen trades at 3.7x earnings, BMW at 3.1x and General Motors 5.9x. A very basic comparison to peers makes Tesla shares trading at $180 and 50x earnings seem expensive.

There is an argument Tesla’s premium is justified by their push into gigafactories, but it’s hard to justify the extent of the disconnect in valuations.

Tesla is a fantastic company, but Tesla shares will need to fall further, or see their sales increase dramatically, to become attractive.