10 Shares Shaking Off the Eurozone Gloom
LONDON -- The FTSE 100 is down 10.1% on where it stood at this time last year. Yet the 10 blue-chip shares listed below have advanced, on average, 19.5%. The average yield for this portfolio of winners is 2.9%, and each one pays a dividend.
It seems that no matter how bad an economy gets, some companies will thrive. Similarly, even in a bear market for equities, some shares will advance significantly. While the FTSE 100 is 13% off its highest point in the last 12 months, each of the shares below is close to its high for the year. As you may have expected, shares in the utilities sector have fared better than most.
I screened the market to find companies trading within 3% of their highest price of the last year.
Market Cap (millions of pounds)
One-Year Price Rise
Unilever (NYS: UL)
International Power (OTC: IPRPY)
Next (ISE: NXT.L)
United Utilities (OTC: UUGRY)
Croda International (ISE: CRDA.L)
From these 10, I've picked out three companies that look particularly interesting.
A series of high-profile retailers have encountered difficulties in recent years. In some cases -- e.g., Clinton Cards and GAME -- shareholders have seen their investment wiped out. Other companies have suffered massive share-price declines, and their long-term independence is being questioned, as with JJB Sports and HMV.
Shares in clothing retailer Next are up 50% over the last year. This time last year, Next shares cost 2,242 pence. Then the shares were on a historic price-to-earnings ratio of just 10.4. The P/E against 2012 earnings was just 8.9. Between 2011 and 2012, earnings at Next grew 16.3%. The dividend rose 15.4%.
How have Next shares done so well while its sector peers and the wider market have struggled?
Next has shaken off investor pessimism toward retailers by delivering impressive online growth. For 2012, Next Directory sales grew 16.4% and profits increased 18.3%. International Directory sales rose threefold. Next is forecast to deliver 6.9% earnings-per-share growth this year and 9.5% the next. Today the company trades on a historic P/E of 12 and 11.2 times the 2013 consensus estimate. That's not particularly demanding for such a class act.
Croda is a specialist chemicals company with an impressive track record. For the last three years the company has delivered, on average, annual EPS growth of 33% and dividend growth of 43% per annum.
One of Croda's specialities is providing raw materials for the cosmetics industry. In the company's most recent trading statement, Croda reported a 13.7% increase in profits from this division. Cosmetics companies seem to have successfully convinced men that they also need the products only women used to buy. This presents real revenue growth opportunities for Croda.
Croda demonstrates how the market will reward success -- especially if it can be convinced the success will continue. Croda lacks exposure to the financial sector and only has indirect consumer risk. As such, the shares have been somewhat unaffected by the current panic.
Perhaps investors should not be surprised how well Croda shares have done. Unfortunately, at today's price it looks like Croda's biggest gains may have already been made. The market demands that investors stump up for shares in this huge success story. The company today trades on 18.4 times 2011's earnings and 16.9 times the 2012 consensus forecast. If you are looking for a cheaper alternative, Treatt might be worth examining. Treatt is a similar business to Croda but trades on a lower P/E ratio and pays a higher dividend.
Shares in betting company Paddy Power are not just at a high for the year; the company's success has been so great that the shares today trade at an all-time high.
In the last five years, Paddy Power -- which is registered in Dublin and has its share price denominated in euros -- has doubled sales and increased profits more than threefold. This year, the company is forecast to grow its dividend 63%. Should this payout come through, Paddy Power's dividend for 2012 will be almost four times the 2006 figure. For 2011, Paddy Power reported a 38% increase in EPS and a 40% uplift in the dividend. Operating margin came in at 28.4%, its highest in five years.
The market loves a winner. Paddy Power's winning streak has seen it become one of the most expensive shares in its sector. The company trades on a P/E of 21.5 times consensus forecasts for 2012. Despite the rapid increase in dividend, the shares are forecast to yield just 2.2%. Value investors might therefore look elsewhere in the sector. William Hill, for example, trades on just 10.2 times next year's EPS forecast and is expected to yield 4%.
Finally, let me tell you that more income ideas can be found within this Motley Fool report: "8 Shares Held By Britain's Super Investor." The guide reviews the investing approach and portfolio of City dividend legend Neil Woodford and is free to download today.
Further investment opportunities:
At the time this article was published David does not own shares in any of the above companies.Motley Fool newsletter services have recommended buying shares of Unilever. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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