If you stick by a stock for the long term, the rewards can really spice up your portfolio. Just look at these two stocks, which have grown an unbeatable 3,000% since 8 July 1996.
Spice up your life
Why that curious date? It marks 22 years between the Spice Girls releasing their first single Wannabe and the announcement of their reunion tour, and was calculated by online platform AJ Bell to explore how the best shares have fared since Scary, Sporty, Posh, Baby and Ginger entered our lives. It’s a worthwhile effort, given that the true rewards of investing are to be measured in decades rather than years.
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Cranswick (LSE: CWK) rose a chart busting 3,156% based on share price growth alone. The stock won’t be on everybody’s radar although I recently examined this artisan food-to-fork meat producer and found that it has surfed the foodie wave rather nicely.
Who do you think you are?
The Bury-based food producer’s share price has risen from 90.6p in July 1996 to 2,945p today. If you had invested £10,000 as Wannabe hit number one, you would have picked up 11,037 shares which would now be worth a massive £325,039.
I’ll tell you what every investor wants, what they really really want: hindsight.
Growth has remained pretty meaty (but not scary). It is up 407% as measured over 10 years and 161% over five (when McFly’s Star Girl was number one, apparently). It is down 10% in the last year but is in a bullish mood, recently commissioning a state-of-the-art products factory.
Say you’ll be there
The downside is that the £1.5bn FTSE 250 stock now trades at a premium valuation of 19.3 times forecast earnings and yields a relatively low 2%, but with cover of 2.6. Four years of successive earnings per share (EPS) growth are slowing, to a forecast 4% in the year to 31 March 2019, then 6% afterwards. I think Cranswick should continue bringing home the bacon despite the growth of veganism, although with a little less sizzle.
Second-best performer is Clarkson (LSE: CKN) which is up 3,000% in 22 years. The FTSE 250 shipping services provider’s long-term performance is good but it has done little to float investors boats lately, rising just 17% over the past five years.
Clarkson was scuppered by a profit warning in 2016 and again this April when management bemoaned a “challenging environment” in both shipping and offshore capital markets, and lower freight rates within the tanker market. This came as a shock as one month before it said 2018 would be a year of continued growth as core markets recovered.
There was slightly better news in August despite an 18% fall in interim profits to £18m, as conditions picked up in the second quarter. However, macro-economic and political uncertainties have hardly gone away since then, and any slowdown in global growth or recession would knock Clarkson.
2 become 1
My colleague Peter Stephens reckons it could prove rewarding for those who can stand a bit of volatility, with EPS forecast to drop 12% this year then rebound 24% next. However, its pricey forward valuation of 24.3 times earnings, and forecast yield of 3.2% with cover of 1.3 takes the wind out of my sails. Like the Spice Girls, it may struggle to revive the glory days.