Rudi’s View: The Quiz

This story features DOMINO'S PIZZA ENTERPRISES LIMITED, and other companies. For more info SHARE ANALYSIS: DMP

By Rudi Filapek-Vandyck

On October 17th I launched a quiz and the question to be answered was: what do the following ten stocks all have in common?

– Campbell Brothers ((CPB))
– Domino's Pizza ((DMP))
– ARB Corp ((ARP))
– Blackmores ((BKL))
– Reckon ((RKN))
– Ramsay Healthcare ((RHC))
– Mc Millan Shakespeare ((MMS))
– M2 Telecommunications ((MTU))
– Hansen Technologies ((HSN))
– Coca Cola Amatil ((CCL))

As I later on repeated the question via Sky Business' Lunch Money, we received quite a number of responses, both via our own FNArena database as well as from Sky Business viewers. Many of these responses were of excellent quality in that emphasis was placed on low levels of debt, a high return on equity, growing profits, growing dividends, and all supported by relatively robust business models. All these characteristics played an important part during the selection process.

Only a few had noticed all these ten stocks are up for the year (index is down circa 12%, popular stocks such as BHP Billiton, Woodside Petroleum and Fortescue Metals are down more) and there was one response that all ten stocks were now looking fully priced, which is an equally important observation.

However, the answer I was looking for was all of the above plus the fact that ALL TEN STOCKS are not only up for this calendar year, all are today HIGHER THAN IN NOVEMBER 2007. That, I thought, was worth highlighting.

There are some important lessons to be learned from the past years. A growing economy does not automatically correspond with healthy gains for the share market. Companies that achieve the highest growth in earnings do not also provide the highest investment returns. If the main share market index is down, this doesn't mean there's no money to be made. (The ASX200 is dominated by the Big Four banks and large resources companies).

Once investors start looking back they will see most of these stocks have made quite sizeable gains while the index, and the more popular stocks, are nowhere near where they were at the peak in 2007.

With the exception of Hansen Technologies and M2 Telecom, all these stocks have been and will remain on my personal radar (I have now included HSN and MTU as well). They have proved their intrinsic worth throughout the toughest of times. These ten stocks also prove that when it comes to putting together a long term investment portfolio, nothing beats solid, growing dividend paying industrial stocks.

(I think I start sounding like a broken record on this matter, but still worth pointing out in my view).

Believe it or not but I also learned something new about these selected stocks, thanks to Matthew Christensen from Hill Capital: the compound total investment return for each is at least 100% for the past five years which means investors would have earned their original investment back from the combination of dividends and capital gains (i.e. doubled the original investment).

Time for the prizes. We have two winners, one from the FNArena database (existing subscriber) and one via Sky Business. Both will receive three months of full access to FNArena. Congratulations to Gordon Hillbrick from Manifold Heights in Victoria and to Peter Bell from Buninyong, also in Victoria.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

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