The UK stock market has had some notable winners this year but I’m not rushing to buy whichever shares have delivered the most impressive recent returns. Momentum attracts attention, creates fear of missing out, and can make a rising share look impossible to resist.
But it can also distract investors from companies that are less fashionable, yet potentially more attractively valued.
In my opinion, Croda International‘s (LSE:CRDA) one such example. The specialist chemicals group has endured a difficult period, but that may be why it deserves a closer look.
Before considering the opportunity though, it’s worth asking why chasing winners can be dangerous.
Why I’m wary of chasing winners
Successful shares can become vulnerable when investor expectations rise faster than the underlying business. As we know, past performance doesn’t guarantee future results. It can also produce an expensive valuation, which naturally reduces the margin of safety.
That doesn’t mean popular companies are automatically bad investments. It means buying after the easiest gains have been made can leave less room for disappointment. If results merely meet expectations, the share price may struggle. If growth slows, recent gains can quickly turn to losses.
That’s why I’d rather hunt for value before a recovery is already priced in. It requires a bit of trust and commitment, but can also achieve a better risk/reward balance.
Why Croda interests me
Croda makes speciality ingredients used in consumer care, life sciences and industrial markets. Its products are not always visible to consumers, but they can be important in personal care, healthcare and manufacturing.
Trading has been challenging. In the year ended 31 December 2025, earnings per share (EPS) fell 60.9% to 44.4p, while operating profit dropped 51.6% to £110.1m.
However, the latest results show improvement. For the six months ended 30 June 2026, sales rose 4.6% organically to £880.5m, adjusted operating profit increased 6.1% to £155.8m and adjusted EPS climbed to 78.6p from 72.2p.
Croda’s trailing return on equity’s (ROE) only 3.65%, while its net margin is 4.61%. Those figures aren’t impressive. Yet the balance sheet isn’t obviously stretched. Net debt was £577.9m at 30 June, equal to 1.4 times adjusted EBITDA.
The dividend’s another attraction. Croda declared a total 2025 dividend of 111p per share and maintained its 2026 interim payment at 48p. At recent prices, the yield’s roughly 3.4%. The company also has a long record of annual payments, although dividends are never guaranteed.
