5 Shares You Should Have Bought In October

Published in Investing on 1 November 2012

We examine some high-flying shares that still look good.

The FTSE 100 (UKX) ended October on 5,783 points, for a modest gain of just 41 points over September's close of 5,742 points. It did peak higher during the month on positive UK economic news, but fresh earnings fears from the US knocked the markets back a bit in the final week.

Still, we've had some pretty impressive share price performances during the month, and there may well be a good bit more to come from some of them...

ARM Holdings

Chip designer ARM Holdings (LSE: ARM) put on 90p (16%) to end October on 665p. Until then, the shares were just at break-even point for the year, having gone through a 20% dip during the summer.

The big news was a 22% jump in third-quarter pre-tax profit to £68m, announced on 23 October. That came from an 18% rise in quarterly sales to £228m, after ARM's customers manufactured 2.2 billion ARM-based microprocessors during the three-month period.

The shares have eight-bagged since 2009, and are now on a forward price-to-earnings (P/E) ratio of 40 for the full year, so there's plenty of future growth already in the price. But we're really still in the early days of mobile computing, so that could well be justified.

Home Retail

Home Retail (LSE: HOME), the owner of the UK's Homebase and Argos chains, enjoyed a very strong month, with its shares picking up 25p (28%) to reach 114p. And that's taken the price up 65% since its 69p low point in June. The reason, of course, is the stopping of the rot at Argos.

Half-year results released on 24 October showed a 29% fall in operating profit to £19m, as expected. But the firm's plan to turn Argos towards internet shopping is paying off, with multi-channel retail accounting for 51% of all Argos sales.

The company's new five-year plan should see at least 75 Argos stores either closed or relocated, in order to better serve the move from catalogue-led to digital-led retailing. This could be the start of something good.

Premier Foods

Shares in Premier Foods (LSE: PFD) bounded up by 43p (67%) to 107p during October, after an important disposal and restructuring.

The firm reached an agreement to sell off its sweet spreads and jam division, and focus on what it calls is "Power Brands" -- and at the third-quarter stage, sales of those brands had risen for the third successive quarter.

This is a great recovery after the share price collapsed in response to a profit warning last October, when the firm was forced into discussions about its banking covenants.

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Taylor Wimpey

Housebuilders seem to be gaining every month, and the one I'm picking for October is Taylor Wimpey (LSE: TW), whose shares gained a very nice 6.8p (12.5%) to 61.1p during the month. The shares are on a P/E of 16 for the year ending December, which is high compared to the FSTE long-term average of about 14.

But with strong earnings growth forecast, that drops to under 13 for next year, and the shares are on a PEG ratio (which compares P/E to earnings growth) of only 0.2 for this year and 0.4 for next -- growth investors generally see anything under 0.7 as a good sign.

Anglo American

Shares in Anglo American (LSE: AAL) ended October 86p up on 1,903p. That's only a little under 5%, but it could be the start of something bigger.

Anglo shares have crashed this year as the miner's profits took a hit -- disproportionately higher than the rest of the sector, so it wasn't all down to falling commodities demand. But the shares have been creeping up over the month, and got an extra boost when the firm announced that chief executive Cynthia Carroll is to step down.

The well-publicised problems surrounding platinum mining in South Africa remain, but if they can be addressed over the next few months, it could turn out that we're at a good buying opportunity now.

Some of the shares discussed here are quite risky, and many long-term investors prefer to go for dependable dividend-paying shares.

Neil Woodford, who regularly beats the FTSE, is an acknowledged expert at the dividend game, and Motley Fool analysts have put together their free report, “8 Shares Held By Britain's Super Investor” to delve into some of his major holdings. Click here to get your free copy, while it's still available, and it will be delivered direct to your inbox.

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> Alan does not own any shares mentioned in this article.

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Comments

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apprenticeDRL 01 Nov 2012 , 4:02pm

Can I add FGP to this - in the 180s even up to last week - now broken the 200 barrier. I have made a quick 10% plus the yield is 11.7%.

If you were nimble you could have also made a quick 20% on WCW which wasnt really covered on Motley Fool, they are also paying a 5.5% yield.

I am actually a long term buy and hold investor by the way as my posting makes me look a bit of a speculator. I am planning to hold FGP for a while and collect the dividends as long as they are maintained.

I did look at Premier foods but I still think they are loaded with debt and seem to be selling off the family silver so withholding my judgment on this one.

mao44 01 Nov 2012 , 6:04pm

apprenticeDRL

Aren't FGP also loaded with debt and have a large pension deficit?

apprenticeDRL 02 Nov 2012 , 8:42am

mao44 - yes this is true, but while they maintain the dividend yield I will hold them

AleisterCrowley 02 Nov 2012 , 11:05am

Next article:
"Six Numbers you should have picked for last Saturday's Lottery"

UranRSole 14 Nov 2012 , 1:25pm
UranRSole 14 Nov 2012 , 1:29pm

Or maybe...." 8 score draws you should have picked for last Saturday's football".

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