Five Shares You Should Have Bought In October

The FTSE 100 fell 1.7% in October, its first monthly drop since June. These five shares did much better, with one jumping 28%.

With holiday season long forgotten, the market had an eventful October. At one stage, it came perilously close to surging through the psychologically irrelevant 5,300 level, but finished the month on a downer, as the FTSE 100 fell 1.8% on the last trading day of the month.

However, to put things in some perspective, the leading index is still up a whopping 46% from its March 2009 lows, a truly stunning performance.

As to what's next for this market, who knows? Will it surge even higher from here, breaking through 5,300 and headed higher still, or will it slump back to 4,500, plunging us all into a depressive state? Answers in the comments box below, please…

Anyway, as ever, there were some bright shining lights. If you'd bought these five shares at the beginning of October, you'd be feeling rather pleased with yourself.

I generally try to highlight companies of interest rather than necessarily the biggest risers on the month, with hopefully one or two of these companies set for an exciting future.

The Shares You Should Have Bought

Obviously a one-month time period is too short a space of time to measure investing success. Share price gains could be due much more to luck than to good management. But whatever the reason, investors in those five companies won't be complaining!

Why Such Juicy Gains?

So why did the companies listed above move so much in just a one-month period?

Until today, Brooks Macdonald's major claim to fame might have been the EPIC symbol it shares with Warren Buffett's Berkshire Hathaway. But now, courtesy of its 20% rise in October, it is famous in its own right.

Brooks Macdonald is an investment manager, and during October said "Trading across the group has continued to be very encouraging...The group is well positioned to continue its growth on a number of fronts".

The company has a net cash position and is growing quickly, with profits forecast to grow 30% in 2010 and a further 23% in 2011. Valuation-wise, it is not cheap, but then again, growth doesn't come cheap. Brooks Macdonald might be a small company to keep an eye on.

Sex Doesn't Always Sell

Oxford Instruments researches, develops, manufactures and sells high technology instruments, its three segments being Nanotechnology Tools, Industrial Products and Service. October has seen the company announce a number of orders, including one from University of California Santa Barbara for its FlexAL Atomic Layer Deposition (ALD) tool.

I'm unlikely to become an expert in nanotechnology, plasma and the like in a hurry, so all I can do is say Oxford Instruments sounds an exciting and sexy company, and the company is forecast to make good profits in the two years ahead. Still, in the past, Oxford has struggled to generate large operating margins, so it may be that sex doesn't sell as well in instruments as it does in other industries.

Warming The Cockles

Evolution Group is a corporate financier and broker. In late October the company released a trading statement to warm the cockles of any investor's heart, saying "The group is experiencing strong trading across all its businesses and 2009 full-year profit is expected to exceed current market forecasts".

Sadly this good news has not gone unnoticed by the market, as Evolution trades on a forward P/E of 20. Companies who beat expectations often have a happy knack of consistently doing so, so Evolution might be one to keep an eye on over the coming months.

Up 254% In A Year

Sticking with the finance sector, asset manager BlueBay Asset Management had a stellar October, and the shares are now up a stunning 254% since I mentioned them in Five Painful Stock Market Lessons last November.

This October, BlueBay said "The first quarter of the financial year 2010 has been characterised by robust investor demand for credit product and strong investment performance from the great majority of BlueBay's funds".

Even after the big run-up in the shares, brokers are forecasting huge profit growth this year and next. The forward P/E of 14 looks reasonable, but BlueBay's performance will likely depend on the health of the stock market. As for that, it's anyone's guess.

Tough Love

Finally, QinetiQ Group, purveyor of services and solutions for government defence departments, jumped 16% in October, mostly on the news that chief executive Graham Love is standing down from the company with Leo Quinn of De La Rue (LSE: DLAR) replacing him. It seems shareholders didn't have much love for Love, and/or have much respect for Quinn.

The shares have struggled since floating at 200p in 2006. On a forward P/E of 9 they look quite cheap, but they do have a fair amount of debt. Future appreciation might depend on how whether Quinn can live up to the stock market's lofty expectations.

Finding The Shares That Might Take Off Next

What does all this prove? Two things…

1) Share prices can take off, sometimes unexpectedly, at unexpected times, and by surprisingly large percentages. Even though October wasn't a great month for the wider market, some good gains were still made.

2) Patience is required. Some of the companies mentioned above have seen their share prices absolutely hammered from their 2007 and 2008 peaks. But all need not be lost. Just because a company has lost 60% or 70% of its value, doesn't mean it can't rise from the ashes and enrich investors who were brave and skilful enough to buy when all about them were panic selling.

More on the economy and the markets:

• The Waterloo Of The Bears
• The Easiest Way To Become A Millionaire
• Time To Sell And Lock In Your Gains

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> Bruce Jackson doesn't have an interest in any of the companies mentioned in this article.