Should I buy the FTSE 250’s 10 top-performing stocks of the last 10 years?
In a previous article, I looked at the 10 top-performing FTSE 100 stocks of the last 10 years. These stocks delivered an average annualised total return of 30.6% over the period, smashing the Footsie’s 8.3%.
Today, I’m looking at the big winners of the FTSE 250. In this case, the top 10 produced an average annualised total return of 32.9%, versus the mid-cap index’s 14%.
The table below shows the FTSE 250’s top performers for the 10 years to the end of 2018.
|Company||Sector||Sub-sector||10-year annualised total return (%)||Forecast P/E 2019||Forecast dividend yield 2019 (%)|
|JD Sports Fashion||Consumer cyclical||Clothing retailer||44.5||15.7||0.4|
|Howden Joinery||Consumer cyclical||Home furnishings||41.4||14.3||2.6|
|Sirius Minerals||Basic materials||Speciality chemicals||39.4||n/a||n/a|
|Games Workshop||Consumer cyclical||Leisure goods||34.9||18.3||3.9|
|Entertainment One||Consumer cyclical||Entertainment||31.6||15.1||0.4|
|Synthomer||Basic materials||Speciality chemicals||28.3||10.7||3.7|
|Inchcape||Consumer cyclical||Car retailer||27.5||9.3||4.6|
|Safestore||Real estate||Self-storage operator||26.6||19.0||3.2|
In the article on the FTSE 100 top performers, I noted that the economic backdrop of the last decade had been particularly favourable for cyclical industries: “The 10-year period started in the depths of the 2008/09 financial crisis and recession, and was followed by the economic turbocharging of quantitative easing (QE) on an unprecedented scale and a record period of low interest rates.”
As you can see, the table of the FTSE 250’s top performers is dominated by consumer cyclicals. Interestingly, there’s no concentration in any particular sub-sector, suggesting these businesses may have superior qualities to their rivals. The market appears to think so, as their P/Es are generally above the average of their peer groups.
As we enter a new phase of no QE and rising interest rates, the economic backdrop may not be as favourable for the kind of returns these five companies have delivered over the past decade, particularly from the current starting point of their relatively high P/Es. However, they could still produce decent returns if the economy remains reasonably robust, although my personal leaning is more towards non-cyclical businesses at the present time.
There are two companies in the basic materials sector. Sirius Minerals is developing a giant mine in North Yorkshire for a multi-nutrient fertiliser. The company’s immediate prospects rest on the success of a crucial stage-two fundraising — and its form (how dilutive it will be for existing shareholders). News on this is expected within 10 weeks, and I’d like to see the outcome, before considering investing.
Meanwhile, Synthomer is one of the world’s leading suppliers of aqueous polymers that help customers in a range of industries create new products and enhance the performance of existing products. The business isn’t immune to economic cycles, but management reckons its portfolio of polymers and geographic diversity give it resilience during periods of challenging macroeconomic conditions. For this reason, together with its record of growth, relatively low P/E and sturdy dividend yield, I rate the stock a ‘buy’.
The remaining three companies — Computacenter, Diploma and Safestore — may repay your further investigation. In particular, I’d be happy to buy a slice of Diploma (whose “many fine qualities” have been discussed in depth by my colleague Kevin Godbold), and Safestore (whose “growth strategy and all-round stability” appeal to fellow Fool Paul Summers).
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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Howden Joinery Group and Synthomer. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.