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LONDON -- The bull market of 2013 has pushed a lot of shares up into new territory. Here are the five largest companies trading within 3% of their high for the year.
Shares in Vodafone (LSE: VOD ) are up 25.5% in 2013. Just as they are near a high today, at the start of the year, they traded at a two-year low.
Vodafone shares have risen amid increasing speculation that they will receive a bid for their 45% share in U.S. mobile firm Verizon Wireless. Its partner in the joint venture, Verizon Communications, is currently exploring whether it could buy out Vodafone. A huge amount of posturing is taking place, the latest being the suggestion that Verizon Communications will prevent the joint venture from paying dividends to Vodafone. That seems unlikely, as Verizon Communications needs such payments to enable it to pay its own shareholders a dividend.
I will ignore the speculation and continue to hold Vodafone for the dividend income.
British American Tobacco
The recent trading update from British American Tobacco (LSE: BATS ) assured the market on its progress in 2013. It also assured me: I am shorting the shares and am more convinced than ever that BATS is hugely overpriced.
BATS shares today trade at 17.5 times last year's results. The average FTSE 100 company trades on 16.5 times trailing earnings. 11.4% earnings per share (EPS) growth is forecast at BATS, vs. 9.5% for the FTSE 100 on average. So, why am I short?
Because I cannot think of a single blue-chip company whose long-term future looks worse than British American Tobacco's.
From its last trading statement, tobacco sales to Asia-Pacific were up 6.7%. Sales to Americas: down 15.6%. Europe: down 10.3%. EMEA: down 1.8%. Overall tobacco sales were down 3.6%. BATS is on the verge of going ex-growth.
Shares in BT (LSE: BT-A ) have increased 29.2% in the last year. That's the kind of rise that a share can deliver when investors change their minds about a company's prospects. Today, BT trades on 11.5 times the consensus of analyst forecasts. That's still a big discount to most FTSE 100 shares and a long way below the P/E of 14.8 that rival shares in British Sky Broadcasting shares trade at.
BT's fiber-to-the-cabinet offering "Infinity" is enjoying fast growth. The company is also making strides in becoming a provider of paid-for sports television.
While there is no signficant earnings growth in analyst forecasts, the City is expecting big dividend increases this year and the next. This puts the shares on a forecast yield for 2014 of 3.7%.
If BT can return to growth, its share price revival could be just starting.
Superbrewer SABMiller (LSE: SAB ) has been making new all-time highs every couple of months for the last three years. However, there are now signs that the valuation is beginning to look stretched.
SAB shares are currently priced at 25.8 times last year's EPS and 22.5 times forecasts for 2013. That puts the shares among the 10 most expensive in the entire FTSE 100. However, one-third of the FTSE 100's constituents are forecast to deliver better earnings growth this year.
In the last five years, shareholder dividends at SAB have been increased at an average rate of 12.7% per year. Unfortunately for income investors, the share-price growth means that SAB is expected to yield just 1.9% this year. That's a long way below the average yield on a FTSE stock.
Catering and facilities management firm Compass (LSE: CPG ) is probably one of the least talked-about FTSE 100 shares. That's likely because it has no real public face: Most of its sales are made to large corporations and government departments. Compass is also oneU.K. blue chip that makes its biggest sales outside the U.K.: North America is 44.5% of revenues vs. 39.3% for Europe and Japan.
With its last results, Compass announced a 17.9% increase in EPS, accompanied by a 10.4% dividend rise. In the last five years, EPS growth at Compass has averaged 22.1%. In that time, dividend increases have averaged 15.6% per year.
The long-term and non-discretionary nature of much of Compass' work means that investors have a high visibility of future earnings. The market rewards this with a premium rating: Compass shares trade on 18.3 times consensus EPS forecasts for 2013.
Blue-chip shares such as the above are the cornerstone of many top fund managers' portfolios. To help you learn from the best British fund manager, The Motley Fool has prepared a special report on the stock selections of super-investor Neil Woodford. "8 Shares Held by Britain's Super-Investor" gives the lowdown on some of Woodford's top picks. Just click here to get your entirely free copy of this analysis today.