As investors were often flooded with information concerning the poor performance of the main indexes, and primarilythe blue chip FTSE 100. Commentators this year have highlightedthe underperformance of that index due to its overweighting towards oil, mining and big banks.
Top of the stocks
But 2015 hasnt been a total washout for manyof the FTSE 100 constituents with at least half of themshowing a gain, and some of them asignificant one. Indeed, if I could have foreseen the average 50% gain enjoyed by diversified investments group DCC (LSE: DCC), 12 months ago, I would have sold my house and invested in three stocks. DCC is one, and the other two are? Fund supermarket and asset manager Hargreaves Lansdown (LSE: HL) and housebuilder Taylor Wimpey (LSE: TW).
Of course, no sensible investor really invests so narowly. To do so is foolhardy as we know shares come with risks that can seriously harm your financial health should theperformance sour.
However, it does pay to select certain types of shares that exhibit characteristics like operating in the sweet spot in the economic cycle, boasting a competitive moat, and enjoying strong trading momentum.
Looking at the three companies being reviewed today, its fairly easy to see what caused their outperformance. Can they repeat itin 2016?
DCC seems an unlikely winner given itsenergy sector links. Butwin it has. Management hasmade a number of acquisitions for future growth. One such back in June 2015 saw the company complete the acquisition ofthe assets that comprise the Esso Express unmanned retail petrol station network and the Esso Motorway concessions in France.
The acquisition should provide DCC Energy with a scalable platform for further growth, particularly in the unmanned retail sector. When management last updated in November, they guided the market to expect slightly higher-than-forecast earnings, though given the recent warm weather the actual outcome could be slightly weaker than management expected.
Feel the quality
Trading at nearly 40 times expected 2016 earnings, shares in asset manager Hargreaves Lansdown dont come cheap but youre paying for quality. Indeed, there are few blue chips that can boast such high quality metrics. Return on Capital is north of 80% ranking it at number 12 in the market. Return on Equity is nearly 68% (even more impressive due to the company having no debt) and the company has 50% operating margins.
The company has held up very well given the fact that its a geared play on the stock market, though a market crash wouldnt bode well for shareholders buying at these prices.
There are plenty of happy shareholders at FTSE 100 housebuilder Taylor Wimpey, though not as happy as those who purchased shares at sub-7p in October/November 2008.
The shares, along with other housebuilders have been on a strong run. When management updated the market back in November, they pointed to a strong summer andautumn. And although build costs were rising on the back of higher labour costs, this was more-than-offset by increases to selling prices and business efficiencies.
On a 2015 price-to-earnings ratio of just over 13 and a near-5% yield, I wouldnt be surprised to see the shares making further progress in 2016. However, the book value at nearly 3 times tangible book suggests that these shares are no longer the bargain they once were.
Another attraction forthis basket of shares is the dividend appeal. While the yields on offer do range from sub 2% through to nearly 5%, all the companies here have grown the dividend since 2011, some longer still.And as patient income seekers will know, a well-covered growing yield when taken over time, can provide a wonderful return that keeps you warm at night.
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Dave Sullivan has no position in any shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.