Ten stocks that have weathered the financial crisis
Steady companies with exposure to emerging markets or other long-term growth drivers have taken the global macro headwinds in their stride over the last five years.
By Mark Smith, Senior Reporter, FE Trustnet
Thursday July 26, 2012
Aggreko, British American Tobacco and ARM Holdings have been among the best-performing FTSE 100 stocks during the ongoing global financial crisis, according to FE Analytics
This month marks five years since the trouble began, when global markets started to show signs of weakness. While the stock market as a whole has failed to make any headwind in that period – the FTSE All Share index is up just 2.08 per cent, according to FE data – some companies have gone from strength to strength.
They have had to deal with market crashes, rallies built on false dawns, a lack of consumer confidence and a severe shortage of credit from the banking sector.
Yet despite the difficulties, the top-10 FTSE performers have returned an average of 206 per cent to shareholders, our data shows.
Best-performing FTSE 100 companies over 5-yrs
Source: FE Analytics
||5-yr returns (%)
|British American Tobacco
Richard Hunter, head of equities at Hargreaves Lansdown, says that what these businesses have in common, and what equity managers look for when they carry out their analysis, are strong balance sheets, good cash flows and a proven ability to grow earnings in difficult markets.
"With the exception of Hargreaves Lansdown there aren’t many UK-facing companies on the list," he said. "The most successful companies have recognised the weakness in a recession-hit UK and have looked to grow their business elsewhere."
"SABMiller is a good example. It has made a number of acquisitions and is gaining a strong foothold in the world’s emerging markets."
The beer company is behind several popular brands, including Peroni, Miller Genuine Draft and Grolsch, and has gained penetration in Latin America, China and Africa. Our data shows that it has returned 128.06 per cent over the last five years.
"BAT is another," continued Hunter. "Tobacco stocks have come into fashion a great deal over the last five years due to their defensive characteristics but we mustn’t forget that as emerging market consumers become wealthier, they are looking to more expensive, western brands. "
"BAT is taking advantage of that trend."
British American Tobacco is held by 360 funds in the IMA universe, including star manager Neil Woodford’s Invesco Perpetual Income
and High Income
funds. Our data shows the stock is up 154.16 per cent over five years.
Aside from the emerging market story, some companies have profited from exposure to other long-term trends.
"The likes of Petrofac, Tullow Oil, Meggitt and to some extent Croda have been beneficiaries of a rise in the oil price and growing demand for energy across the world," said Hunter.
"Elsewhere, I’m not surprised by the success of ARM. The technology company has ties with Apple and is riding that wave. It has also posted some very good results itself."
Given the poor growth outlook for the UK economy, Hunter recommends that investors continue to look for companies with overseas exposure that are likely to emerge from the recession stronger than when they went in.
"Companies which have stuck by their management, offered shareholders stability and grown their earnings should be good investments over the next five years," he added.
"Investors need to remember that while the FTSE is roughly flat over the period, that doesn’t take into account dividends. The average yield of a FTSE 100 company is 4 per cent and that is likely to underpin investors’ portfolios over the hard years to come."