The power of 10
Every investor dreams of that elusive 10-bagger, the stock that multiplies every pound or dollar you invest by 10. This doesn't just happen with smaller companies: at least 10 FTSE 100 stocks have delivered a total return of between 1,000% and 2,000% over the last decade, according to research from Fidelity Worldwide Investment. Last week, I looked at the "Top 3 FTSE Shares Over the Last 10 Years". But the next three are almost as impressive. And they are...
There are more peaceful places to do business than Mali, but few more profitable. Over the last decade, Randgold Resources Ltd (LSE: RRS) (NASDAQ: GOLD.US), a gold miner and explorer mostly based in the Islamist-menaced African nation, has returned a dazzling 1,723%. Its strategy is to unearth multi-million ounce deposits in the prospective gold belts of West and Central Africa, and develop them into profitable mines. It currently operates four gold mines, Morila, Loulo and Gounkoto in Mali and Tongon in Côte d'Ivoire, and is developing a fifth, Kibali in the Democratic Republic of the Congo. After enjoying a golden decade, its share price is down 23% over the past six months, and that's despite reporting record production levels in 2012 and a 16% rise in full-year profits to $511 million. Even a 25% dividend hike didn't help the share price shine, although on a current yield of 0.6%, this isn't for income seekers. The falling gold price is a concern, as investors become less risk-averse. Political unrest is another worry, both in Mali and the Côte d'Ivoire. But Randgold is hungry for more, and has launched a hefty programme of capital investment. The recent share price dip looks like a buying opportunity, except I worry that gold's glory days are now over. Despite its impressive portfolio of mines, this stock is too risky from me. Gold bugs will feel differently.
If gold isn't your thing, what about black gold? Today's second FTSE 100 multi-bagger is oil explorer Tullow Oil (LSE: TLW), which returned 1,600% over the last decade, making it a sweet 16-bagger. It enjoyed a solid 2012, with sales revenue up 2% to $2.34bn, and full-year profit before tax up 4% to $1.1bn. Net debt fell from $2.9bn to $1 billion. Highlights included the discovery of a new oil basin in Kenya, the Ngamia-1 and Twiga South-1 wells, its fourth major discovery in six years. It also enjoyed success in Uganda and Ghana. Exploration always be a risky business, and Tullow wrote off an eye-watering $671 million on failed exploration activities, a massive leap from the $121 million lost in 2012. Happily, its strong balance sheet should help it shrug off these losses, as well as fund the 40 exploration and appraisal campaigns in 2013, including new territories in Africa as well as Guinea, Greenland, Uruguay and Mozambique. You only have to look at the company's earnings per share (EPS) growth to see how volatile your holding is likely to be. It rose an almighty 795% in 2011, before crashing to -5% last year. Current forecast is for a sober 12% in 2013. Tullow hasn't enriched recent investors, its share price is down 4% over the past three years. That could make now a good entry point, if you can stand its pricey valuation of at around 27 times earnings. For those willing to take a bigger risk with part of your portfolio -- and from time to time you should -- Tullow is still tempting.
I've never quite got around to buying Scottish engineering company Weir Group (LSE: WEIR), and just look what I've missed. A massive 1,555% return over the past decade. Pumps, turbines and valves make the industrial world go round, and Weir has earned investors a pretty penny by supplying them. This is a nicely diversified global business with customers in 170 countries across the US and Europe, Latin America and Asia Pacific. Weir is a play on global growth, and can be volatile. There was a great buying opportunity last summer, when it briefly became the most heavily-shorted stock in the FTSE 100, following a slide in demand for equipment from the US shale gas industry. The stock has since rebounded 66%. And that's the problem I have with Weir. After such a great run, where can the share price go next? Recent full-year results were good, with revenue rising 11% to £2.53bn in 2012, and profit before tax rising 12% to a record £443 million. Its total dividend was up 15%, and although Weir yields just 1.5%, another double-digit hike is planned for 2013. These were results to gladden the market, but EPS growth looks modest at 2% in 2013 and 10% in 2014. Weir isn't that expensive, trading at 15.9 times earnings, but I wish it was a little cheaper.
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