Equity markets have witnessed a serious correction in recent weeks after a strong start to 2012. The S&P 500 (SPY) benchmark lost nearly 6% over the last three months and 10% from the highs since early April.
Within this correction, there are individual companies outperforming the general market. In the following I will review the outperformers of the last three months and judge the potential for future returns.
Winning Portfolio
Some investors were fortunate enough to invest in these companies (at least $1 billion market capitalization) which dramatically outperformed the S&P 500. Whether it was luck or skill, some investors actually made a lot of money despite the market-wide correction.
The absolute winners of the last three months were Expedia (EXPE), American Eagle Outfitters (AEO), Family Dollar Stores (FDO), Sherwin-Williams (SHW) and Scripps Networks Interactive (SNI) which gained between 18% and 34% in just three months.
Expedia
The online travel company was the absolute winner gaining 34% in a mere thirteen weeks. Shares gained over 23% on a single day at the end of April after the company reaffirmed its full year 2012 EBITDA guidance. The online travel booking industry as a whole has seen strong returns so far this year, and Expedia as one of the larger firms in the industry is benefiting as well, trading at a fair valuation of 19 times annual earnings.
American Eagle
The specialty retailer operating in North America has seen its shares return 27% during the last three months. Early in March the company announced that it expects a modest sales increase for the full year of 2012. In May the retailer raised its first quarter earnings outlook. It now expects to earn between $0.18-$0.20 per share for the first quarter compared to an earlier guidance of $0.08-$0.10. On the back of the raised guidance shares hit a four year high.
Family Dollar Stores
The operator of retail discount stores returned 23% over the last three months. At the end of March the company announced that it expects comparable store sales of 5% to 6% for the entire year of 2012. The company expects full year earnings per share of between $3.55 and $3.75 which drove the shares up to its all time highs. As a result of the strong share price performance, shares now trade at 20 times annual earnings.
Sherwin-Williams
The manufacturer and distributor of paint and coatings returned 44% year to date and 22% in the last three months alone. The company set an ambitious profit target for the entire year of 2012 by January and raised its full year outlook in April. The company expects to earn between $5.75 and $6.05 for the full year of 2012. In the meantime the company raised its quarterly dividends by 2 cents to $0.39 per share for an annual dividend yield of 1.2%
Scripps Networks Interactive
The lifestyle content company operating television and other interactive brands saw a strong performance in recent months. In the end of March the company announced the acquisition of Travel Channel International in a deal valuing the UK based company at 65 million British Pounds. Shares recovered in the first half of 2012 after shares have been trading in a downwards trend in the second half of 2012.
One thing is for sure. In the next quarter, this list will be totally different. Investors should critically asses their portfolio in an attempt to maximize their chances of ending up with some of the winners in the next phase of the equity market.
An investor who does his research can still find value especially in some small- and mid capitalization firms in an attempt to maximize his chances of ending up with the winners.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
