Mark is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Major League Baseball recently played its annual all-star game. That made me think about what stocks might be all-stars from the first half of the year. The real question? How will they do going forward?
My criteria for the stock all-stars are as follows:
- Stock gain surpassing that of the S&P500 index YTD.
- Motley Fool CAPS rating of five. [CAPS is a rating system used by investors who enter their thoughts at The Motley Fool as to how a stock will perform against the S&P500 over a certain period of time.]
- Large-cap company (i.e. from the "major leagues").
Here is part of the starting line-up:
Science is terrific
The diversified high tech company Thermo Fisher Scientific (NYSE: TMO) had a great first half, with the stock up 30%. The company is a major supplier of scientific instruments, lab equipment, chemicals and other items. The company is in a growth mode, with earnings up nearly 50% over the last five years. Revenue has increased too, averaging a 5% annual gain over the same period. That growth should continue going forward as the pharmaceutical industry, which is a major customer, is expanding.
Other all-star stats it has include a relatively low long term debt to equity rate of 0.43, and a low payout ratio of 16.0, which allows plenty of room for the dividend to be bumped up if the company so desires.
Clothing not optional
Another all-star that had a fantastic first half is the clothing and footwear marketer VF Corp (NYSE: VFC). The stock rose 28%.
VF has consistently reported strong results over long periods of time. Earnings have doubled and revenue increased by 47% over the past five years. The company would like to see a repeat of these results in the foreseeable future, and plans to get there by focusing on growing its low-cost online business instead of building more brick and mortar stores. It also a great record of acquiring new brands, and that will likely continue.
Other superior stats include a low debt/equity ratio of 0.28, high gross margin (50%) and a history of dividend increases going back 40 years.
Another top performer during the first half was Ecolab (NYSE: ECL).The stock leaped 15%. The company, which provides technology and services that make water cleaner and food safer, has reported accelerating growth in the last year. Earnings are up 50% and revenue has soared 74%. It hasn't been a slouch over the long haul either, with solid double-digit (13%) revenue growth over the past five years.
The trend is likely to continue as most of its client industries, such as foodservice, hospitality, energy and healthcare are expanding as the economy improves; this is a company that continually improves its processes and identifies new markets to tap into.
The Magic Kingdom
With a soaring stock price, up 24% in the first six months of 2013, Walt Disney (NYSE: DIS) was hitting on all cylinders until the release of its latest movie, The Lone Ranger. Some projections are that it could lose $100 million. Maybe Johnny Depp should return his fee for starring in the flick to help balance costs...
In spite of the flop, the company still has a lot going for it, including an enviable history of strong earnings and dividend growth. All of the fundamentals are in place for continued success. Disney has manageable debt (long term debt/equity = 0.32), solid gross margin (27%) and a strong management team led by CEO Robert Iger, who just signed on for a few more years (and a few more million.) The current P/E ratio of 19.7 doesn't make the stock a value play but it's also not overly expensive either.
Disney's acquisition late last year of LucasFilms, which controls the rights for the very valuable Star Wars franchise, should pan out down the road. Just the licensing fees on Star Wars merchandise alone are worth more than $200 million per year for the company. And when the next movie in the series is released in 2015, even more revenue will flow Disney's way. The company's ESPN division has grown exponentially, and generates tons of advertising revenue and affiliate fees -- about $9.4 billion worth -- to help tide Disney over when a major movie is late or flops. The company will probably mark frequent appearances as a stock all-star on its way to the Hall of Fame.
Will the all-stars continue to perform at such a high level in the second half and beyond? The four that I listed above, Thermo Scientific, VF Corp., Ecolab and Disney, seem to have the right fundamentals in place for that success to continue. It's possible you will see them listed as all-stars for many years to come.
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Mark Morelli has no position in any stocks mentioned. The Motley Fool recommends Thermo Fisher Scientific and Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!