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Shares top picks gained over 20% on a 12 month basis
Thursday 12 Jan 2017 Author: William Cain

Stocks featuring in Shares’ weekly Great Ideas section over the last year racked up gains of 12.4% versus a comparable return on the FTSE All-Share of 11.4%.

On an annualised basis the result was 24.8% versus 22.8%, as we explain in What is Great Ideas?

What is Great Ideas?

Shares’ Great Ideas is published every Thursday within the magazine and online and features what we believe to be our two strongest stock ideas of the week.

These articles aim to help filter out some of the better opportunities among the 2,000 or so stocks listed on the London Stock Exchange and provide a starting point for readers to conduct further research.

Ideas usually come from interviews with management teams, analyst commentaries and forecasts and independent research conducted by the Shares team.

We track the performance of stocks which feature in this section to give readers an idea of the quality of our ideas over the past 12 months.

Shares Great Ideas have over the last 12 months averaged a gain of 12.4% versus a gain on 11.4% on our main reference index the FTSE All-Share.

How do we work this out?

After each edition of Shares, published every Thursday, we add the two featured Great Ideas stocks to the list and remove the two oldest picks.

In each article we record the share price of the stock featuring in Great Ideas and separately we record the index value of the FTSE All-Share on the same day the story is written.

This leaves us with a rolling 12-month list of 98 stocks on which to track performance against the benchmark.

The oldest stocks in this list were written about 52 weeks ago and the newest only one week ago, meaning the average time that has elapsed since we wrote about a stock is about 6 months. If we wanted to turn the performance of Great Ideas into an annual number, a time period most investors assess performance over, we would double the reported number of 12.4% to a 24.8% result on a 12-months’ basis.

Equally, the FTSE All-Share semi-annual return we use of 11.4% increases to 22.8% on a 12 months’ basis.

It’s important to emphasise Great Ideas is not a real portfolio, it is a collection of stock ideas whose performance we track. Readers should always conduct their own research and/or seek financial advice before buying any security. Past results are no guide to future performance.

Strong endorsement

The performance is a particularly strong endorsement of the quality of Shares’ stock picking ideas over the last 12 months because the FTSE All-Share was unusually hard to beat in 2016.

That’s for a couple of reasons.

Firstly, the All-Share’s performance was boosted by the red-hot mining and oil sectors, which gained 115% and 33% respectively in the last 12 months.

Only six out of 98 companies Shares featured over the last 12 months came from these sectors yet our ideas still beat the market on average.

Second, FTSE 100 stocks beat mid cap FTSE 250 stocks handsomely in 2016 but most of Shares’ Great Ideas are picked from the lower end of the market.

Finally, Shares Great Ideas’ had a hard Brexit: 15 of our picks breached their 20% stop-loss in the volatility following the EU referendum. That locked in losses of 20% apiece and meant we had fewer stocks which participated in the second-half rally.

Great Ideas Review table

How we did it

The few mining stocks we picked did most of the heavy lifting. Mineral sands miner Sierra Rutile (SRX:AIM) gained 90.2% after a takeover offer which fell somewhat short of our expectations of the stock’s valuation but nevertheless delivered a stunning four-month return.

South Africa miner Petra Diamonds (PTRA) is up 84.2% since 25 February as it recovered from almost defaulting on its debts in 2015 and said it expects to be cash flow positive in the current financial year.

Platinum miner Tharisa (THS) gained 80% since 29 September as better-than-expected production and a pledge to pay a maiden dividend at results announced on 29 November.

Patent translator RWS (RWS:AIM) improved 71.8% as the company put some of its swelling cash resources to work with the $70m acquisition of US-based Corporate Translations.

Wireless Group, operator of TalkSport and other radio stations, was one of a couple of Great Ideas stocks to benefit from mergers and acquisition activity over the year, gaining 71.8% after its takeover by Rupert Murdoch-controlled News Corporation.

 

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Important information:

These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell Youinvest.

Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.

Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.

The Shares team
Disclaimer

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The value of your investments can go down as well as up and you may get back less than you originally invested. We don't offer advice, so it's important you understand the risks, if you're unsure please consult a suitably qualified financial adviser. Tax treatment depends on your individual circumstances and rules may change. Past performance is not a guide to future performance and some investments need to be held for the long term.