12 Shares That Thrashed The Market

Published in Investing on 13 July 2012

In the last 12 months, these companies have left the rest for dust.

No matter what the economic conditions, there are always winning shares out there. I trawled the market to find the outperforming blue chips. To qualify for my list, a company needs to have outperformed the market by more than 20% in the last 12 months.

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The outperforming shares are:

Company12m OutperformancePrice (p)P/E (five-year average)Market cap (£m)
British American Tobacco (LSE: BATS)25.7338014.566,025
SABMiller (LSE: SAB)21.4265017.042,132
Diageo (LSE: DGE)35.7165016.541,430
Imperial Tobacco (LSE: IMT)26.5262017.026,001
Rolls-Royce (LSE: RR)48.189010.016,654
Associated British Foods (LSE: ABF)25.2129016.310,216
Experian (LSE: EXPN)24.197218.49,769
Wolseley (LSE: WOS)24.0239011.06,819
Next (LSE: NXT)40.731909.95,345
InterContinental Hotels (LSE: IHG)26.0156014.74,552
Intertek (LSE: ITK)46.5270019.24,321

I have picked out four companies that look particularly interesting.

1) SABMiller

SABMiller is the company behind some of the world's leading beers. Manufacturers of the eponymous Miller brand, the company also produces Peroni and Grolsch. SABMiller employs over 70,000 people worldwide, who collectively make over 48 billion pints of lager every year.

Alcoholic beverages is usually considered a defensive sector for investors. Drinkers are unlikely to pack up entirely and there is an expectation that prices will always rise with inflation. These two factors produce a reliable stream of income that investors will frequently pay a premium for. During turbulent times investors often look for safe stocks to hold. SABMiller looks to have been a beneficiary of this flight to safety.

SAB has a market capitalisation of £42.1b and last year delivered $4.2b of net profit. Earnings per share (eps) is expected to increase by 13.1% this year and again by another 13.2% the year after. This follows a five-year period in which the company has a compound annual growth rate in eps of an impressive 12.8%.

2) Experian

Experian is one of those large companies most people have never heard of. Prior to 2006, Experian was part of Great Universal Stores, the forerunner to Home Retail (LSE: HOME). Experian provides information to companies on the financial reliability of individual consumers (commonly known as a credit check). Companies use Experian's services when they sign up new customers for credit agreements such as mobile phone contracts.

Experian has capitalised on the massive change in consumer attitudes toward credit. The company's success has seen it grow to a market capitalisation of £9.8b and a position in the FTSE 100 (UKX).

Experian's almost unique business model has always been rewarded with a premium rating from investors. A track record of increasing dividends and eps by around 14% for the last five years might explain why the company trades today on 17.4 times forecast earnings for 2013. Similar growth is expected again the next year, meaning the P/E falls to 15.5 times 2014 earnings.

3) Wolseley

Wolseley started life as a company serving the Australian sheep farming industry in the 1800s. It has matured into a company providing a range of products to builders and the trades.

Almost one half of Wolseley's sales today come from North America. Around one third comes from the UK and Nordic region. The rest is derived from its businesses in Central Europe and France.

In the UK, Wolseley is probably best known for its Plumb Center and Pipe Center operations. Until recently, the company was also owner of retailer Bathstore and builders' merchants Build Center.

Wolseley's recent period of outperformance began around the time of the company's last final results. Those figures showed a reinstated dividend, a large increase in earnings per share and a significant reduction of debts. Since then, the interim dividend has been increased by one third as the business has recovered strongly.

Today the shares trade at 14.7 times consensus estimates for 2012, putting the shares on a prospective yield of 2.3%.

4) Next

Don't write off retailers just yet. While some are struggling for their very survival, others are thriving. Next is one such example. In its most recent results announcement the company delivered a 16.3% increase in eps and a dividend hike of 15.4%.

While the downturn on the high street hasn't helped (high-street sales were down 1.4%), it appears that Next have cracked online sales. Revenues in the Next Directory operation increased 16.4% and now make up around one third of sales and almost half of profits.

Next's growth is expected to continue for the next two years. Analysts forecast a 7.2% rise in earnings this year followed by another 9.8% the year after. The company's dividend is expected to continue rising at a similar rate, meaning the shares today trade on a forecast yield of 3.1%. Next shares are up 31.5% in the last 12 months. The company is clearly one of the sector's quality operators. Next's most recent trading statement reported a decline in retail sales of 3.9%, offset by a rise in Directory sales of 11.8%.

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Further investment opportunities

> David does not own shares in any of the above companies.

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Comments

The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.

MarsExpress0 16 Jul 2012 , 1:59pm

As a customer, Experian are a NIGHTMARE to deal with. They have corrupted personal data (address) but refuse to change it. Their on-line web application form screws up addresses which have both a house/flat name AND number. I have been pursuing this through the Financial Ombudsman Service for ten months, but STILL have not managed to get Experian to correct my address. The laughable thing is that because Experian's address database is corrupt, and therefore screws up Bank and Building Societies validation processes, I get compensation from both Banks and Building Societies - for messing me about - but not from Experian, the real culprit. I switched to Equifax.

4spiel 16 Jul 2012 , 3:13pm

A lot of shares are ramped up because of current yield beating savings rates. Investors should be very selective and BEWARE THE INHERENT DANGERS. Shares are sustained by money printing and gilts and corporate bonds are at hideous levels. Don't follow thelost herd when the horse has bolted !.

ProfessorMarcus 16 Jul 2012 , 3:47pm

Hello 4spiel.

I found your comment interesting as I'm becoming more aware that the prices of most 'quality' high-yielding/income shares seem to be trading at a premium.

But of the main asset classes what's the best bet at the moment? I think I'll sit back and keep some cash ready for potential market downturns.

4spiel 16 Jul 2012 , 7:30pm

Cash is very important as whilst there is the possibility that investors will still push good stocks higher and we don't know how long for there is also the possibility that individual ones might drop out due to earnings disappointments and they may find a good buying level. I think raising cash from second best options bought because the first choice had bolted if they look fully valued. Indeed holding cash in accounts for as little as 2% less tax not very attractive .Indeed 4% tied up for in excess of 3years neither.and how much really is the FSA guarantee really worth if everybody were to claim from Halifax Midshires and the rest of them ! Although inflation set to fall to 1.7%. There are two sides to this argument and you have to be a stock picker and find value for money.globally. My gut feeling is that its not a good time to INVEST to STORE capital now -there have been and some time there will be. But the writer of this article is doing good job getting people to think about value rather than yield. Some of us might have to compensate for low interest rates by SAVING MORE CASH !!!!!! .

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