10 Shares The Recession Could Not Stop

Published in Investing on 3 April 2012

We unearth some companies that have thrived in the last few years.

During the recent recession and financial crisis, some companies managed to continue their growth despite whatever the global economy was throwing at them. An exclusive band of stocks survived the recession and emerged even stronger, increasing dividends to their shareholders along the way.

An economist would typically define a recession as two successive quarters of negative GDP growth. In the most recent recession, GDP growth first turned negative in the third quarter of 2008. It did not return to positive territory until the final quarter of 2009. The FTSE 100 began this period at 5,413 and finished it at 4,989, although it ranged from as low as 3,531 to as high as 5,637 during this time.

So how did the UK's listed companies manage during this period? I've trawled the market looking for those firms the recession could not stop: companies that increased profits and shareholder dividends during the recession, continued that success until today and are today expected to increase earnings again by more than 5%.

I managed to find 96 companies qualifying under these criteria. That might sound a lot, but when you consider there are close to 2,600 companies listed on the London Stock Exchange, these winners make up less than 4% of the total.

Of those 96, I picked the ten companies with the lowest forward P/E ratio. These are the stocks expected to continue growing but the market is demanding the lowest premium for their success.

WH Smith (LSE: SMWH)5467388.8
Motivcom (LSE: MCM)100288.9
Dewhurst (LSE: DWHT)390268.9
Kewill (LSE: KWL)76699.0
Mears Group (LSE: MER)2562159.0
Northbridge (LSE: NBI)283439.0
Hill & Smith (LSE: HILS)3392629.1
First Derivatives (LSE: FDP)485809.2
Judges Scientific (LSE: JDG)655279.3
Greene King (LSE: GNK)5131,1149.3

Of the ten, four in particular caught my eye...


Northbridge Industrial Services is one of those companies very few of us will ever buy anything from, but it can still do a roaring trade nonetheless. 

The company hires and sells specialist kit to utility companies and the oil and gas sector. Northbridge's range includes compressors, generators and transformers. A customer of Northbridge's could be a refinery in Azerbaijan, or an oil explorer in remote Australia. Northbridge sends big, ugly equipment to big, ugly places and at the same time delivers handsome returns to shareholders. 

The acquisition of Australian oil sector rental company Tasman Oil Tools in 2010 has been transformational for Northbridge. Sales for 2011 are forecast to be double that of 2009, and earnings per share (EPS) for 2012 is expected to be 18% higher than last year.

First Derivatives

First Derivatives is also a member of an even more exclusive club: companies from Northern Ireland with a London listing. 

First Derivatives started life in 1996 and today employs over 450 people worldwide. Their business revolves around software products and consultancy to niche areas of the financial markets industry: principally data, trading and risk technology. 

Its founder, Brian Conlon, still owns nearly 50% of the company, so management's interests should be aligned with shareholders. Dividends have increased every year for the last seven years and EPS is forecast to increase over 35% in 2012.

Judges Scientific

Judges Scientific's business success has been reflected in its share price: the shares have increased more than six-fold since since the beginning of the recession. 

Judges own a collection of other companies that manufacture specialist scientific instruments. The company's ability to continue making products its customers feel will give them an edge, or help them comply with industry regulation are the pillars of their recession-beating performance. 

That said, Judges has not been completely immune from the recession. In November 2008, the company had to withdraw from an acquisition that would have seen Judges more than double in size, blaming 'the reduced appetite of banks for M&A lending'. Judges recent final results for 2011 reported a 36% increase in EPS and 33% dividend hike.

Greene King

The only £1bn+ stock on the list is Greene King, the brewer and pub chain. 

Greene King has proven itself to be a reliable investment over a period that can be measure in decades -- the company has increased its dividend to shareholders every year for more than thirty years. 

Despite the fact we are frequently being told trading conditions are proving fatal to community pubs, Greene King is demonstrating how some companies seem to be perennial winners. Its success looks to continue, as a trading statement issued in January reported a bumper Christmas with sales up 17%, driven partly by a whopping 11% rise in food sales and increased thirst for the company's flagship ale, Old Speckled Hen.

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commissionhater 04 Apr 2012 , 1:10pm

Interesting that so many of these are relatively small companies. How about Booker, with Mkt Cap of > £1bn? They service one sector that has sailed serenely through the recession - convenience retail and independent catering. The company wandered rather aimlessly through the back end of the 20th Century, but now has a CEO, Charles Wilson, who has transformed it. It is the larget Cash & Carry in the UK, and is now starting out in India, with plans to open their 4th depot in Mumbai soon. Happily, I bought in at 33p in March 09, and it's now trading at 84p. Dividend yield has grown to just under 3%, which is not surprising because Charles Wilson owns a substantial chunk of equity.

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