It has been an up and down year for the UK stock market but some names have really shone over the course of the last 12 months. In this article we go through the market cap ranks to identify the best performing large-, mid- and small-cap stocks in 2023.

£5 billion+ market cap

While Nvidia (NVDA:NASDAQ) has dominated headlines globally as excitement around AI (artificial intelligence) helped drive its stock to new highs, Rolls-Royce’s (RR.) performance has been not too far off what is widely considered one of the hottest stocks of 2023.

The aerospace engineer has seen its fortunes transformed under tough-talking CEO Tufan Erginbilgiç who started in the role on 1 January. His harsh rhetoric on the company’s previous failings convinced the market he was serious about fixing them and at an investor day on 28 November the company outlined ambitions to quadruple profit in five years. Evidence of whether or not it is executing on this plan will likely dictate its performance in 2024.

Cruise line operator Carnival (CCL) has seen its shares almost double in 2023 driven by booming demand from returning travellers. Carnival’s chief executive Josh Weinstein said in September that 2024 volumes will recede due to the firm running out of inventory to sell despite adding 5% more capacity in 2023. According to the Cruise Lines International Association around 35.7 million passengers are expected to set sail in 2024, up 13% on 2023 and 6% higher than 2019.

Investment company 3i (III) has had a banner year in terms of returns, driven principally by its stake in Dutch discount retailer Action. Action, the firm’s largest holding, continues to gain market share with its value-for-money offering, racking up like-for-like sales growth of more than 19% in the first nine months of 2023 and helping to generate a 10% total return for 3i in the six months to September.

2023 has been all about reclaiming organic growth for accounting software firm Sage (SGE) after a few years where progress got soggy. With operating margins stabilised at around 21%, there is genuine hope that the UK’s largest software stock by market cap can confidently aim for the high 20% margins earned historically. With typically strong free cash flows and a handy dividend yield of 1.9%, Sage might be the sort of tech stock to win further backing in 2024.

The strong showing for Irish building materials group CRH (CRH) does not paint a particularly positive picture for the UK market as a whole as a big driver has been the company’s decision to transition its primary listing to the US. It seems to have provided the hoped-for kicker to its valuation it hoped in the short term. To back this up, CRH needs spending on US infrastructure and construction to stay robust in the medium term.

Online car marketplace Auto Trader (AUTO) has had a good year, experiencing record buyer levels in the first half of 2023.

The firm has managed to gain market share in the new car market due to structural changes. Its ‘Deal Builder’ product – which allows buyers to value their part-exchange vehicle, has brought success, expanding from 50 to 500 dealers due to demand.

With cost savings from the integration of its new car leasing proposition Autorama, the firm looks in a decent position despite some recent turbulence in the used car market.

£2 billion to £5 billion market cap

British retail institution Marks & Spencer (MKS) saw its market value double in a banner year which saw the foods-to-fashion firm deliver a string of earnings upgrades, reduce net debt and restore the dividend after a four-year absence. The high street stalwart also made a triumphant return to the FTSE 100 as investors rewarded the turnaround progress made under the stewardship of CEO Stuart Machin and chairman Archie Norman. Their strategy to reshape Marks & Spencer, which has cut costs whilst reconnecting with its customer base, is demonstrably working, so much so that broker Peel Hunt called the half-year results on 8 November ‘embarrassingly good’. The £360 million pre-tax profit achieved in the six months to 30 September smashed the lowball £275 million figure called for by consensus.

Litigation finance provider Burford (BUR:AIM) won a significant US court ruling in September in its eight-year legal case against Argentina on behalf of former shareholders in oil company YPF.

Damages could reach $16 billion, although the Argentine government is likely to appeal the ruling so it is not a ‘done deal’ yet. Meanwhile, the firm swung to a third-quarter profit of $272 million from a loss last year after revenue soared in the first nine months.

Built in Britain, pan-European enterprise IT infrastructure supplier Computacenter (CCC) is just the sort of partner many medium-sized businesses rely on in a world of AI, cloud computing and other fast-changing tech trends. Beating expectations has become the norm in 2023 and with the promise of regular dividends and surplus cash being returned to shareholder’s pockets, more of the same is possible if tech bulls are right about 2024.

Food delivery platform Deliveroo (ROO) is expected to make a small profit in 2024 compared to the more than £50 million of losses which analysts were forecasting at the beginning of the year. Investors have welcomed the pivot towards profitability rather than sales growth, sending the shares sharply higher.

It could be argued that Darktrace (DARK) remains one of the UK’s few tech world leaders yet it has become something of a Marmite stock for many investors. Analysts have recently been banging its drum, believing the cybersecurity group’s products have got better over time and seeing strong tailwinds for demand from rising cybercrime and new regulation, and investors have agreed, hence the strong 2023 run. With a shorting attack now behind it, following an independent clean bill of health probe, there could be more to come from its artificial intelligence and behavioural analysis cyber-attack protect and fix kit.

Nutritional products and ingredients company Glanbia (GLB) is up more than a third in 2023 driven by strong demand for its performance nutrition brands. In November the company upgraded its outlook for full year 2023 earnings per share growth to 17% and 20% from 12% to 15% in August which was an upgrade from the first quarter expectation of 7% to 11% growth.

£500 million to £2 billion market cap

The shock €5 billion acquisition of Vodafone’s (VOD) Spanish operations in September 2023 is what has powered Zegona Communications (ZEG) stock this year. It might seem mad that a cash shell consolidator set up in 2015 by former Virgin Media executives Eamonn O’Hare and Robert Samuelson worth just £1.9 million could pull off such a deal, but it has form in Spain, previously acquiring then selling Spanish cable TV companies Telecable (sold in 2017) and Euskaltel (2021). Zegona claims an 88% return on shareholders’ net invested capital on those two deals, returning £335 million cash to shareholders in 2021.

Pubs and hotels Groups Mitchells & Butlers (MAB) and JD Wetherspoon (JDW) have benefited from punters going out to the pub this year and a recovery in investor sentiment towards hospitality.

Both shares have gained around 60% for the year but they remain well below pre-pandemic trading levels. While sales have been rebuilt back to 2019 levels, profitability still lags as the sector struggles to digest higher energy, food, and labour costs. The good news is that cost pressures appear to be abating which should allow a full profit recovery in the next couple of years.

After earlier profit warnings had melted the value of their holdings, there was a sweet end to the year for investors in premium chocolatier Hotel Chocolat (HOTC:AIM). Shares spiked in November after the Angus Thirlwell led company recommended an all-cash offer from privately-owned US food giant Mars, which resulted in a tasty 2023 gain of 136%. Mars’ 375p offer price represented a 170% premium to Hotel Chocolat’s undisturbed share price.

Africa-focused gold miner Resolute Mining (RSG) has been a beneficiary of strong precious metals prices and operational progress over the last 12 months. The company has been pursuing a turnaround of its Syama mine in Mali and as Berenberg analyst Richard Hatch observes: ‘Production and costs at the mine should benefit from improved plant stability and more consistent delivery from the underground mine, augmented by feed from the open-pit oxide mine.’

The Mako operation in Senegal has performed more robustly but its short mine life means exploration success here could be key to Resolute’s fortunes moving forward.

£10 million to £500 million market cap

Oil wellhead technology play Plexus (POS:AIM) has seen a very significant bounce in the last few months as a highly bombed-out share price has shown signs of life. The driver for the market’s reappraisal is a series of important contract developments – including in August the increase in value of a major contract from £5 million to £8 million as well as further news such as a rental agreement with Neptune Energy struck in early November.

Shares in McBride (MCB) surged 249% higher as the private-label cleaning products maker benefited from earnings upgrades stoked by the cost-of-living crisis, which boosted demand for its budget laundry detergents, dishwasher liquids and surface cleaners. The Manchester-headquartered company demonstrated positive turnaround progress in the year to June 2023, generating a swing from losses of £29.6 million to adjusted pre-tax profits of £300,000 amid a return to volume growth and improved profitability in all five divisions.

Despite uneven metals prices in 2023, several small cap miners shone. Empire Metals (EEE:AIM) soared on record titanium grades unveiled late November at its Pitfield project in Western Australia. Philippines gold producer Metals Exploration (MTL:AIM) has climbed throughout the year as it benefited from record prices for the shiny stuff as well as a ramp up in output from its Runruno project, while a reverse takeover of the owner of an Armenian gold mine in October was the major catalyst for IMC Exploration (IMC).

If you’ve never heard of AIM tiddler Software Circle (SFT:AIM), you are not alone. It claims a 20-year history in the UK software industry as a serial acquirer of ‘vertical market software businesses’ and changed its name from Grafenia in October. It now appears to have a family of companies under its umbrella covering the graphics, e-commerce, finance, property and care management sectors, although what has driven the stock higher this year is harder to discern beyond excitement at potential M&A.

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