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The best performing stocks in the past three months – should you put them in your fantasy fund?

Some stocks have more than doubled in value but their run could be ending

Predicting which stocks will perform well is a difficult task
Predicting which stocks will perform well is a difficult task

Past performance is not a predictor of future performance, as investors are constantly reminded. However, many fund managers will tell you the opposite and deliberately pick the best-performing stocks because they think the run can go on.

This strategy is known as “momentum” trading and is commonly used by hedge funds. The theory goes that stocks that do well will attract more attention from investors and therefore continue to do well, creating a virtuous cycle.

Another reason to pick recent winners is if you expect the trends that drove them higher to continue, such as the easing of the lockdown or a quicker than expected transition to online shopping. 

So in the past three months: which have been the best performing stocks. Do they deserve a place in your Telegraph Fantasy Fund Manager portfolio to help you win £20,000

Gambling stocks have been thriving. William Hill, GVC Holdings –  which owns Ladbrokes and Coral –  and 888 Holdings are all in the top 10 for share price returns.

Other high-flying companies include Trainline, European online retailer AO World, and Games Workshop, owner of the Warhammer brand.

Russ Mould, of fund shop AJ Bell Youvest, said the companies that were hardest hit when the country went into lockdown have seen the greatest share price rallies in the past three months as more optimism has returned to stock markets.  

大发体育网站“The best performing shares have therefore tended to be those whose profits were hit hardest by the viral outbreak, as the potential for a change in fortune is so great.

“Investors also latched on to companies whose business model was perfectly adapted to a period when everyone was stuck at home, as they already operated online. That included white goods delivery expert AO World and online bookie 888,” he said.   

Can they keep going up?

Mr Mould said that the business that had been hit particularly hard could register the fastest improvement if the Coivd-19 outbreak is contained and economic activity picks up quickly in the second half of the year.

大发体育网站However, he also warned a second wave of the pandemic could delay or thwart returns and hit share prices hard, with the spike in cases in America a possible concern for Ashtead – where it makes 90pc of its profits.

大发体育网站The prospects for gambling companies depends on legal changes in America, according to Mr Mould. 

“The bookies will be pleased to see more sport on the nation’s screens but they also need to see more action in America, where sports betting is slowly going through a process of deregulation.

"Over twenty states are open now but this needs careful watching, especially as California appears to be getting cold feet in the face of opposition from local interests. Any setbacks could hurt William Hill and GVC, but further legislation to open markets may tempt traders into further flutters on their shares," he said.

大发体育网站If gold and silver prices continue their resurgence, this could bring further gains for Hochschild which runs three producing mines, two in Peru and one in Argentina, Mr Mould noted.

The Telegraph Fantasy Fund Manager game will run from July 6 to October 2 2020. The winner will receive £20,000 and there will be weekly prizes of £100, courtesy of our sponsor AJ Bell Youinvest. Telegraph Media Group and AJ Bell employees will not receive any prizes. For full terms and conditions, click here. To play, click here.