LONDON -- Since inception in 1985, the FTSE 100 has delivered an average annual return of 6.9% a year. So far in 2013, the index is up 7.6%. Blue chip investors have made a year's worth of returns in just one month.
I found 46 FTSE 100 shares trading within 3% of their highest in a year. You may think that that this means that valuations are stretched and we are due some large falls. Personally, I think that we are at the start of a new bull market and that the index will finish the year even higher.
Of those 46 companies, here are the 10 largest.
| Name | Price (pence) | P/E (2013, forecast) | Yield (%, 2013 forecast) | Market cap (million pounds) |
|---|---|---|---|---|
| HSBC Holdings (HSBA -0.26%) | 720 | 11.1 | 4.4 | 132,436 |
| BHP Billiton | 2,215 | 13.1 | 3.4 | 117,889 |
| Unilever (ULVR 5.67%) | 2,603 | 18.7 | 3.2 | 73,736 |
| SABMiller | 3,158 | 20.7 | 2.1 | 50,368 |
| Diageo (DGE -1.88%) | 1,906 | 18.6 | 2.5 | 47,822 |
| Standard Chartered (STAN 0.53%) | 1,688 | 11.3 | 3.4 | 40,698 |
| Barclays | 300 | 8.0 | 2.4 | 36,723 |
| Reckitt Benckiser | 4,233 | 16.8 | 3.1 | 30,472 |
| Tesco (TSCO -0.55%) | 361 | 11.3 | 4.1 | 28,996 |
| Prudential | 965 | 12.5 | 3.0 | 24,673 |
Data from Stockopedia.
Five shares stood out in particular.
HSBC
HSBC is not like Barclays, Lloyds and Royal Bank of Scotland. HSBC is bigger. It is less reliant on the U.K. It continued to pay shareholder dividends throughout the worst of the financial crisis.
Although HSBC did approach shareholders for more capital in 2009, it was never thought to be in real danger.
Shares in HSBC are now at their highest since January 2010. Despite this rise, the shares remain inexpensive.
HSBC is expected to report an 11% rise in earnings per share (EPS) in 2013. The dividend is expected to rise a similar amount in the year.
I expect that HSBC will announce its results for 2012 in the final week of February.
Tesco
Tesco was probably the most-discussed share of 2012. The supermarket started the year in the worst possible way by issuing a profit warning. This led to a share price fall of 20%.
Since then, Tesco has been winning back investors' confidence. Three weeks ago, Tesco announced improved Christmas trading. New management has been put in charge of the company's key U.K. operations. The company has also raised the possibility that its troublesome U.S. operation "Fresh and Easy" will be disposed of.
Tesco's progress has increased the probability that the company will pay a bigger dividend for the year. If Tesco confirms this with its 2013 finals in April, it will be the 28th year in succession that its shareholder dividend has risen.
Standard Chartered
Standard Chartered was one of my five tips for 2013. So far, the company has not disappointed. Since the beginning of the year, the shares are up 7.3%. I believe that there is still room for the stock to move significantly higher.
The bank is expected to report an increase in EPS of 8.7% for 2012. Profits are forecast to rise another 9.1% this year.
Of all the London-listed banks, Standard Chartered is the least reliant on the U.K. market. The bank's EPS for 2012 is forecast to hit $2.15, more than 50% ahead of the figure for 2006. In that time, EPS increased in every year but one, falling 16% in 2009.
Diageo
Blue chip investors cannot get enough of shares in superbrewer Diageo. So far this year, the shares have risen 6.5%. In the last 12 months, they have increased by 30%. In five years, the shares are 80% ahead. Diageo does not just trade at a high for the year. The shares are currently trading at an all-time high.
A quick glance at figures achieved by the company in recent years shows why the shares are so highly rated. In the last five years, EPS at Diageo has increased by an average of 14% per annum. In that time, the dividend is up by an average of 5.9% per annum.
Another two years of growth are forecast as Diageo continues to increase sales of its drinks brands worldwide.
Unilever
Another company that leverages the power of its branded products is Unilever. The Anglo-Dutch giant owns a huge range of food, hygiene and domestic product brands. The recognition that Unilever's brands have mean that the company can demand higher prices for its products. Higher sales then bring economies of scale. The result is enhanced profit margins.
These profits are delivered with a much higher level of predictability than most shares on the market. Throughout the credit crunch and financial crisis, Unilever continued to trade profitably and pay dividends to its shareholders.
Unilever is forecast to advance EPS by 9% in 2013, with the dividend rising nearly 10%.
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