10 Super-Shares That Have Soared in the Crisis
LONDON -- The past five years have produced pretty pathetic returns for owners of U.K. shares.
The blue-chip FTSE 100 (INDEX: ^FTSE) index of elite U.K.-listed companies reached its boom-time peak of 6,732 on June 15, 2007. Then along came the credit crunch that started in mid-August, followed in 2008-09 by the U.K.'s longest and deepest recession on record. Fears of eurozone solvency have kept share prices under the cosh since 2010.
Hence, as I write, the Footsie stands at 5,662, which is 1,070 points below its 2007 peak. In other words, after more than half a decade, the U.K.'s main stock market index is still nearly a sixth (16%) below its previous peak.
The good news is that five years of decent dividends above, say, 3% a year will have helped investors in U.K. stocks to make a small positive return since mid-2007. Even so, near-zero growth over five years is nothing to be happy about. Indeed, cash deposits would have produced superior returns over the same period.
The FTSE 350's super-shares
Despite five years of lurching from one financial crisis to another, some U.K. shares have performed incredibly well since the boom, which ended in 2007. To demonstrate this, I used the Fool's Bloomberg terminal to find the "super-shares" of the past five years.
Over the five years ending July 9, 2012, Bloomberg found 29 current members of the FTSE 350 index whose share prices have at least doubled in this half-decade. Of these, 13 FTSE 350 constituents have seen their share prices at least triple -- rising 200% or more -- since July 2007.
The 10 top performers
Here are the 10 top performers among these super-shares, sorted from highest to lowest growth:
Share Price (pence)
5-Year Return (%)
Market Value (million pounds)
Dividend Yield (%)
|Randgold Resources (ISE: RRS.L)||5,910||422||5,423||16.1||0.6||9.7|
|Petrofac (ISE: PFC.L)||1,439||239||5,074||12.0||2.8||3.0|
|Croda International (ISE: CRDA.L)||2,291||235||3,205||17.0||2.6||2.2|
|Aggreko (ISE: AGK.L)||2,033||234||5,568||19.2||1.2||4.5|
Source: Bloomberg, 07/09/12; Digital Look, 07/10/12.
As you can see, the average return from these 10 shares in the five years to July 9, 2012, was 299%. In other words, had you invested equally across all 10 companies, you would have almost quadrupled your money in the past five years. Now that's what I call a rip-roaring return!
However, it's also worth noting that -- with the possible exception of Petrofac -- these are very much go-go growth shares, rather than value stocks. Indeed, the average forward price-to-earnings ratio for these 10 shares is over 24, which is almost twice the market's overall rating. What's more, their average dividend yield is a modest 1.6%, which is less than half of the market yield.
Next, I'm going to review the four largest companies from this list, all of which enjoy membership of the top-notch FTSE 100 club. Here they are, ranked by market capitalization:
With a market value of nearly 5.6 billion pounds, Aggreko is the giant of our super-shares. The firm describes itself as "the global leader in the rental of power and temperature control," with 100 locations in 29 countries.
Aggreko has built itself a very profitable niche renting power, temperature-control, and compressed-air systems to businesses all over the world. It is also a supplier to the London 2012 Olympics. Then again, thanks to its share price tripling over the past five years, it trades at 19 times expected earnings. Despite this above-market rating, I reckon Aggreko is worth running the rule over.
2. Randgold Resources
The second heavyweight on our list (with a market cap of 5.4 billion pounds) is gold miner and explorer Randgold Resources, which digs for multimillion-ounce gold deposits in west and central Africa.
Following several major discoveries, Randgold operates four gold mines: three in Mali and another in Cote d'Ivoire. A fifth mine -- in the Democratic Republic of the Congo -- will begin producing gold by the end of 2013.
Randgold tops our list of winners, thanks to its blow-out return of 422% since July 2007. Even so, its shares are not ridiculously overpriced, as they trade on a little over 16 times forecast earnings. If the gold price can climb and hold above $1,600 an ounce, then Randgold could continue to be a winner.
For 30 years, Petrofac has been a leading provider of engineering and other services to oil-field operators. Given the boom in oil and gas prices and revenues since the '80s, Petrofac is riding a rising tide.
Like Aggreko, Petrofac has carved out a profitable niche in a global growth market. Despite this, Petrofac is worth below 5.1 billion pounds, plus its shares trade on a modest rating of 12 times earnings. For me, Petrofac is the pick of this bunch and therefore joins my personal list of winners to watch.
4. Croda International
We finish with a third Footsie firm that has boomed by exploiting demand for niche products. Worth 3.2 billion pounds, Croda has succeeded by manufacturing specialty and industrial chemicals. Its products can be found in all kinds of everyday items, such as cosmetic creams and lotions, dietary supplements, foodstuffs, plastic bags, and motor vehicles.
Thanks to a return of 235% in five years, Croda shareholders must be delighted. Even so, there could be more to come, as this growth share is rated at 17 times earnings and pays a dividend of 2.6%, covered a healthy 2.2 times.
Finally, Neil Woodford, the U.K.'s biggest and best investor, has a terrific track record in finding super-shares. Woodford -- who looks after 20 billion pounds of our money for fund manager Invesco Perpetual -- buys only the very best businesses.
To find out which great British firms Woodford loves to own, read "Eight Shares Britain's Super-Investor Owns." For more about these eight money-making machines -- and Woodford's magnificent mind and methods -- download your free copy of our report today.
Which of these 10 super-shares would you add to your portfolio and why? Please tell us in the comments box below.
More investment ideas from Cliff D'Arcy
At the time this
article was published Cliff does not own any of the shares mentioned in this article. The Motley Fool has adisclosure policy.
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