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28% increase in one month! How 2 UK stocks broke Rolls-Royce’s share price rally

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UK investors can’t look away Rolls Royce (LSE: RR) share price, as it has risen 325% over the past two years. In the last 12 months, it has increased by almost 195%.

No segment can sustain this rate of growth forever, and there are signs of a slowdown. This is still 12.23% higher than last month but nine FTSE 100 Shares were better at that time. Two did particularly well.

Paper and packaging firm DS Smith (LSE: SMDS) was the FTSE 100’s biggest winner, up 28%. Shares rose after the board announced it had agreed to be bought by an FTSE 100 rival. Mundi For about 373p per share.

Paper tigers show their teeth.

Now we also have the possibility of a bidding war with DS Smith listed in New York. International paper, which is offering around 415p. As I write this, the shares trade at 408.8p.

International Paper has until April 23rd to firm up its intentions but I will do nothing but watch with detached interest. Personally, I never buy into takeover speculation. Often, it becomes redundant, and the spike turns into a dip. Also I have already approached the packaging sector. The Smurfit Kappa Group.

The second best actor of the month belongs to Chile. Antofagasta. (LSE: ANTO ), up 23.43%. It’s no flash in the pan, as the copper miner’s share price is up 47.3% in one year and 121% in five.

Antofagasta has benefited from rising copper prices, which have jumped 7.9 percent in the past month on hopes of a Chinese recovery. In February, it reported a solid 8% rise in 2023 revenue and underlying earnings to $6.3bn and $3.1bn, respectively.

The risk is that tensions in the Middle East and rising oil prices reignite inflation, slowing the global economy. This will affect the demand for copper. But my biggest concern is that Antofagasta now trades at 38.58 times trailing earnings. It is too expensive for me.

A top stock but expensive

Rolls-Royce shares aren’t particularly cheap, either, trading at 30.47 times earnings. That’s hardly surprising, given how well they’ve done. I stupidly banked my 187% gain last summer, only to see the share price double since then.

I remain hopeful because the good news keeps coming. Last month, Rolls-Royce announced it would invest £55m to meet growing demand for its large civil aircraft engines. Sales are expected to increase by 40 percent from 2025.

2023 was a great year for the company. Underlying operating profit rose 144% to £1.6bn with free cash flow up 155% to a record £1.3bn. It expects profits of between £1.7bn and £2bn in 2024, with free cash flow of £1.7bn to £1.9bn. The transformation is wonderful but I am wary of buying a Rolls-Royce today.

I worry that early success will go to CEO Tufan Erginbilgic’s head. Its aggressive drive to raise prices has spooked longtime customer Thai Airways. There is a lot of excitement but investors will punish the rolls if it doesn’t deliver.

I’m still keen to restore Rolls-Royce to my portfolio, and intend to buy on short-term weakness. But I wouldn’t bother with DS Smith and Antofagasta.

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