LONDON -- These are the shares that you should have bought three months ago. The FTSE 100 is up 9.7% in that time -- an impressive return. These blue chips, however, have made an average return of 31% in the quarter.
I trawled the market to find large-cap shares that have outperformed the market by more than 15% in the last three months. Just as the market in general has dramatically reassessed the prospects for these companies, is it time that you did as well?
It is useful to note that the big winners come from a number of different industries.
3-Month Price Rise (%)
Lloyds Banking (ISE: LLOY.L)
Hargreaves Lansdown (ISE: HL.L)
African Barrick Gold
UBM (ISE: UBM.L)
Booker (ISE: BOK.L)
* Lloyds was previously loss making.
Four of these stood out in particular.
1. Lloyds Banking Group
Investors were encouraged by interim results from across the banking sector. Lloyds has also avoided the worst of the LIBOR, money-laundering or sanction-busting scandals that have hit the sector.
Currently, investors appear torn on the outlook for the banks. Are banks like Lloyds on the cusp of a massive business recovery, or is the eurozone about to wreak havoc on the value of their assets? Whatever, the share-price action at Lloyds suggests investors are coming around to believing that a recovery is under way.
The fundamentals also appear to be in the buyers' favor. At the halfway stage, Lloyds reported tangible assets per share of 57.4 pence. That's 64% ahead of the current share price. Analysts expect Lloyds to make 2.0 pence in earnings per share (EPS) for 2012, rising to 3.6 pence for 2013. There is also the possibility that dividends will be resumed in 2014.
Lloyds is beginning to look like a profitable company that is trading at a large discount to its book value. If more investors believe Lloyds can maintain profitability, then I expect that discount will narrow -- resulting in a higher share price.
2. Hargreaves Lansdown
Hargreaves Lansdown is one company that Fools are less likely to do business with. Hargreaves runs a collection of online personal finance services, and the largest of these is its managed fund supermarket.
Some private investors believe individual shares are too risky. These investors are often drawn to managed funds from the likes of Schroders and Henderson. Hargreaves Lansdown earns a commission by acting as a shop window for fund management providers that are looking to attract new money.
Whether you expect to become a Hargreaves Lansdown customer or not, any investor must admire what the company has achieved. In the last six years, EPS has been increased almost fourfold. Sales have nearly tripled. The dividend has increased from 3 pence per share for 2007 to 12.9 pence per share for 2011.
Typically, when the markets are doing well, firms serving the investment industry prosper. Perhaps the market revival of the last three months has made investors reassess Hargreaves Lansdown's prospects.
While shares of supermarkets such as Morrison's and Tesco languish, cash-and-carry outfit Booker has earned a premium rating.
Today, shares in Booker trade at 21.0 times consensus forecast for 2012. If the other supermarkets had Booker's rating today, then their shares would be twice the price.
Booker shares started their recent rise following the announcement of final results in May. Booker announced that a 6.1% increase in sales had led to a 17% increase in operating profit. Earnings per share were reported 24% higher and the final dividend was increased 24%.
You would be mistaken to think of Booker as just a collection of ugly sheds selling pallets of beans to corner-shop owners. Booker has a substantial Internet operation that increased U.K. sales 21% in the year. Booker also has a fledgling business in India whose progress is encouraging.
Brokers expect Booker's advance to continue. The shareholder dividend is expected to rise 8.9% for 2013, followed by a 12.4% rise the year after.
UBM provides a range of services, typically used by businesses to help them sell to other firms (B2B). This ranges from corporate events to industry press and data services. The company may be familiar to investors as owner of PR Newswire.
Demand for the services UBM offers are highly dependent on the economy and business confidence. It appears that the market has been surprised at the resilience in UBM's business. UBM announced interim results at the end of July; in the first six months of the year, revenues increased 7.3%, EPS rose 13.9% and the dividend was increased by 6.3%.
Like Lloyds, UBM shares still display some value characteristics despite the recent rise. A huge 27.7% increase in EPS is expected for 2012, meaning the shares trade on a forward price-to-earnings (P/E) ratio of 11.7. The dividend is expected to rise for the next two years, giving well-covered income.
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The article 10 Shares That Soared in the Market Recovery originally appeared on Fool.com.
David owns shares in Lloyds Banking Group. The Motley Fool owns shares in Hargreaves Lansdown and Tesco.The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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