2015 has been a tough year for the FTSE 100, which is down nearly 9% from its opening position of 6,547. Don’t despair, this doesn’t mean every stock on the index has suffered.
New figures from Hargreaves Lansdown show that the top five performing stocks of the year have risen by between 30% and more than 50%. Some have been unfairly punished by the general sell-off in recent days, but do their prospects remain promising?
Far From Wimpey
Taylor Wimpey (LSE: TW) hasn’t just had a great 2015, rising 55% year-to-date, it has had a fabulous five years, up 675% in that time. The housebuilding sector has been on a high, underpinned by low interest rates, rising prices, surging demand and severe property shortages. If Taylor Wimpey builds them, buyers will come. In fact, the biggest problem is that they can’t build homes fast enough, given that the UK needs an extra 200,000 new homes a year.
I’m wary about buying stocks on the back of a strong run and some analysts recently expressed concerns that Taylor Wimpey could suffer when interest rates start rising. That seems much less of a threat today and this stock could continue to build on its recent success.
Mucho Mondi
Mondi (LSE: MNDI) is up an astonishing 49% so far this year. Any company that can report a 30% rise in first-half profits to €490m, driven by soaring sales volumes, certainly deserves your attention. Underlying earnings per share were also on a lick, up 31%. Mondi’s share price is up more than 200% in five years.
The packaging company is one momentum stock that looks to have more in its locker, with forecast EPS growth of 21% this year and 9% next. Its valuation of 18.9 times earnings looks high but not overpriced, and is expected to dip below 15 by the end of next year. Mondi promises much-needed respite from the current gloom.
Full House
Persimmon (LSE: PSN) is another house builder with strong foundations in a booming property market, up 43% this year, and a whopping 495% over five years. First half results showed 11% revenue growth, a 27.5% return on average capital employed (up from 21.7% last year) and a 43% rise in earnings per share. Can it continue? With the housing market defying the traditional seasonal summer slowdown, and interest-rate hikes on the back burner, the future remains promising.
Positive Developments
You won’t be surprised to see yet another house builder in this year’s top five. Barratt Developments (LSE: BDEV) is up 37% this year and 582% over five. Most recent figures show sales up nearly 11%, forward sales up almost 30% and profits before tax up 45% to £565m. Given sky-high demand for under-supplied property, only a full-blown crash can slow this sector now.
Direct Action
Direct Line Insurance Group (LSE: DLG) is the only insurer in the top five, up 30% so far this year. Its decision to diversify away from motor insurance, where competition crushes margins, appears to be justified by a 42% surge in half-year profits to almost £336m. It has also given its tired old Churchill brand a freshen up.
Trading at 13.7 times earnings Direct Line doesn’t look overvalued, and today’s 3.8% yield is forecast to hit 5.8% by the end of next year, making this a tempting income play. It has already issued one special payout to investors this year, with the promise of more to come.
