LONDON -- No matter what the economic conditions, there are always winning shares out there. I trawled the market to find outperforming blue chips. To qualify for my list, a company needs to have outperformed the market by more than 20% in the past 12 months.
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The outperforming shares are:
P/E (5-year average)
Market Cap (million pounds)
|British American Tobacco
|SABMiller (LSE: SAB.L )
|Associated British Foods
|Experian (LSE: EXPN.L )
|Wolseley (LSE: WOS.L )
|Next (LSE: NXT.L )
I have picked out four companies that look particularly interesting.
SABMiller is the company behind some of the world's leading beers. Manufacturer of the eponymous Miller brand, the company also produces Peroni and Grolsch. SABMiller employs more than 70,000 people worldwide, who collectively make more than 48 billion pints of lager every year.
Alcoholic beverages are usually considered a defensive sector for investors. Drinkers are unlikely to pack up entirely and there is an expectation that prices will always rise with inflation. These two factors produce a reliable stream of income that investors will frequently pay a premium for. During turbulent times investors often look for safe stocks to hold. SABMiller looks to have been a beneficiary of this flight to safety.
SAB has a market capitalization of 42.1 billion pounds and last year delivered $4.2 billion of net profit. Earnings per share are expected to increase by 13.1% this year and again by another 13.2% the year after. This follows a five-year period in which the company had a compound annual growth rate in EPS of an impressive 12.8%.
Experian is one of those large companies most people have never heard of. Prior to 2006, Experian was part of Great Universal Stores, the forerunner to Home Retail. Experian provides information to companies on the financial reliability of individual consumers (commonly known as a credit check). Companies use Experian's services when they sign up new customers for credit agreements such as mobile phone contracts.
Experian has capitalized on the massive change in consumer attitudes toward credit. The company's success has seen it grow to a market capitalization of£9.8 billion pounds and a position in the FTSE 100 (INDEX: ^FTSE ) .
Experian's almost unique business model has always been rewarded with a premium rating from investors. A track record of increasing dividends and EPS by around 14% for the last five years might explain why the company trades today on 17.4 times forecast earnings for 2013. Similar growth is expected again the next year, meaning the P/E falls to 15.5 times 2014 earnings.
Wolseley started life as a company serving the Australian sheep farming industry in the 1800s. It has matured into a company providing a range of products to builders and the trades.
Almost one-half of Wolseley's sales today come from North America. Around one-third come from the U.K. and Nordic region. The rest is derived from its businesses in Central Europe and France.
In the U.K., Wolseley is probably best-known for its Plumb Center and Pipe Center operations. Until recently, the company was also owner of retailer Bathstore and builders' merchants Build Center.
Wolseley's recent period of outperformance began around the time of the company's last final results. Those figures showed a reinstated dividend, a large increase in earnings per share, and a significant reduction of debts. Since then, the interim dividend has been increased by one-third as the business has recovered strongly.
Today the shares trade at 14.7 times consensus estimates for 2012, putting the shares on a prospective yield of 2.3%.
Don't write off retailers just yet. While some are struggling for their very survival, others are thriving. Next is one such example. In its most recent results announcement, the company delivered a 16.3% increase in EPS and a dividend hike of 15.4%.
While the downturn on the high street hasn't helped (high-street sales were down 1.4%), it appears that Next has cracked online sales. Revenues in the Next Directory operation increased 16.4% and now make up around one-third of sales and almost half of profits.
Analysts forecast a 7.2% rise in earnings at Next this year followed by another 9.8% the year after. The company's dividend is expected to continue rising at a similar rate, meaning the shares today trade on a forecast yield of 3.1%. Next shares are up 31.5% in the last 12 months. The company is clearly one of the sector's quality operators. Next's most recent trading statement reported a decline in retail sales of 3.9%, offset by a rise in Directory sales of 11.8%.
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