What Is The World's Best Share Today?

Published in Investing on 23 February 2012

What made this firm an ideal share? And where are today's equivalents?

The best share in the world for me, back in July 2009, was Carr's Milling Industries (LSE: CRM).

To cut a long story short, the shares were 425p at the time. They're now 801.5p, having been as high as 875p along the way, whilst paying a few handsome dividends into the bargain.

So what? We can all point to winners and losers we've selected from the past and point out reasons as to why it all went right or wrong. It means little other than perhaps helping us to learn a few lessons; everything is easy in hindsight.

What was so special?

But what was special about Carr's at the price back then was a combination of factors that made it close to the ideal investment for me.

Of course, the basic value parameters made a lot of sense; price-to-earnings, yield, balance sheet value, history and prospects etc. And if these aren't in place, you have to have some genuine insight into prospects -- or a lot of good fortune.

Add to that the fact that the company operates in what has to be the most essential of all industries, namely agriculture and food production, with some engineering in the mix, and any investment made even more sense.

Now consider that the company was experiencing what were always likely to be temporary difficulties (fluctuations in the price of flour and fertilizers). As I said at the time: "Short-term price fluctuations based on temporary bad news can present opportunities". Longer term, the company's prospects look good.

And to say Carr's track record had been a good one would be an understatement. Over the previous ten years, the company outperformed the FTSE 100 by 375%, growing the dividend every year for a decade.

Could anyone run it?

In short, Carr's had a great history, and there was no real reason to presume this wouldn't continue. Of course, you have to bear in mind Peter Lynch's sage advice: "Go for a business that any idiot can run -- because sooner or later, any idiot probably is going to run it."

In other words, a company's philosophy and previously wise course can change for the worse, as GEC/Marconi investors could testify. But there was nothing foreseeable in this regard, and Carr's is a straightforward, easily understandable business.

Furthermore, the market was nicely against it. The macro environment was ideal, purely because it was so terrible. By the time I wrote about Carr's, the shares had already recovered a smidgeon from their absolute low point of 405p along with the rest of the market. But things were still nicely depressed as the FTSE 100 index stood at 4,360. So Carr's has managed a 90% increase (plus dividends), versus around 35% for the wider market.

The fact that Carr's wasn't perceived to have exciting prospects and was little discussed by private investors was another big plus. Similarly, its Cumbrian base was a big tick for me. That isn't to say purely UK operations are a good thing; quite the contrary in fact. But a UK full listing and easy to understand operations and accounts, together with the company's trustworthy nature were (and are) big plus points.

In a perfect world, perhaps Carr's would have more significant overseas operations and the directors would have bigger stakes in the business. But you can't have it all.

And finally, Carr's was still small enough to gallop with a market cap at the time of £37m.

The ideal company

To sum up, if investing in the ideal company, I'd be able to put a tick in all these boxes:

  • Fundamentally good value
  • Essential industry
  • Good dividend paying
  • "Special situation"/ temporary difficulties
  • Excellent track record
  • Understandable
  • Good prospects
  • Contrarian good timing due to macro environment
  • Little discussion
  • UK base, overseas mix
  • Directors' stake
  • Small enough to gallop

I'm sure we could all point to individual shares that have fared a lot better than Carr's over the last two and a half years. But could you find one that had it all -- or close to it?

Anyway, that's not the point. The real point of this exercise is in trying to find similar shares right now. And for that, I need your help. So please tell me if think you know of any candidates in the space below.

And for more hints and tips on picking big stock market winners, download a free copy of '10 Steps To Making A Million'. It's yours, if you join up for The Motley Fool Collective today.

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Comments

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theRealGrinch 23 Feb 2012 , 2:20pm

the ftse hasnt done too bad over the same period with less risk.

CunningCliff 23 Feb 2012 , 5:01pm

My old MD at HBOS tipped Carr's to me in the late Nineties, when its share price was still in two figures. Alas, I failed to listen to his words of wisdom! :0(

Cliff

geddinquick 23 Feb 2012 , 5:20pm

theRealGrinch; Carr's has more than doubled, counting divis - the FTSE has put on 35% over the period the article refers to.

theRealGrinch 23 Feb 2012 , 8:25pm

oh not disputing that - the share along with a number of others has outperformed. In fact, its a share I have looked at many times in more depth after screeners, but never had that final appeal to add it. Of course, dates are moving around to fit :-)

geddinquick 25 Feb 2012 , 2:16pm

No suggestions for the next Carr's then?

Blackboar 27 Feb 2012 , 4:28pm

Carrs has been a great share although I bought in slightly later in the low 500's. Current trading also looking good. Another share I picked up slightly earlier was James Halstead (JHD) which has performed even better with current 1/2 year expected to be yet again a record. I agree these shares do have more risk attached but if you stick to the principles laid out in the article you can mitigate the downside. The next Carr's? Cannot find one that matches all the criteria but my favourite for this year is Pressure Technologies (PRES). They supply oil rigs with high pressure cylinders, and another of my holdings, Lamprell (LAM), is seeing a record order book for new and re-furbished rigs, which suggests that the tide will turn for Pressure Technologies.

bouleversee 27 Feb 2012 , 4:28pm

What a disappointment. I thought you were going to tell us the ideal share to buy now. If you were able to suss out the ideal share in 09, why not now? I actually have 2 lots of Carrs, half bought in Jan. 05 at 548 and the rest in Nov. 2010 at 646 (inc. costs in both cases). Very satisfactory, but not as good as some others I bought in 09 and 10, eg British Polythene (almost tripled, still a reasonable yield and low P/E), Fenner (more than doubled) and GKN (almost doubled), still look pretty good value though I dare say others might say I should be taking profits. I have to confess, however, I wouldn't know what (if anything) to buy now, with the ongoing Greek situation and its eventual repercussions, and that I have also had some shockers.

bouleversee 27 Feb 2012 , 4:32pm

My figs. didn't include divis, btw., which have been very good on original purchase price.

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