Many investors limit their investing universe to the Top 20 or so stocks. This approach is ok and indeed for investors who rely on broker research for their information and prefer to hold only the very largest companies in their portfolio, then this will be their ‘bread and butter’ so to speak.
However as the following five stocks have proved, investors who look beyond the Top 20 and expand their universe to the Top 300 stocks – represented by the S&P/ASX 300 Index (Index: ^AXKO) (ASX: XKO) – will have captured far greater returns over the past three years.
The following five stocks have provided returns to their shareholders over the past three years that are nothing short of extraordinary. Total Shareholder Return (TSR) refers to the share price gain plus dividends received over a specific holding period from a stock. In this case we are looking at the annualised TSR over a three-year period and for comparison we will use the Commonwealth Bank of Australia (ASX: CBA) as a proxy for a Top 20 stock. The Commonwealth Bank has produced a TSR of 19.9% per annum (pa) – which is certainly not shabby, however it’s along way behind these five superstars.
1) Ainsworth Game Technology Limited (ASX: AGI) has produced a TSR of 156.2% pa
2) Freedom Foods Group Ltd (ASX: FNP) has produced a TSR of 123.9% pa
3) Greencross Limited (ASX: GXL) has produced a TSR of 110.4% pa
4) Magellan Financial Group Ltd (ASX: MFG) has produced a TSR of 104.9% pa
5) iProperty Group Ltd (ASX: IPP) has produced a TSR of 93.8% pa
While past performance in terms of TSR certainly doesn’t guarantee that future returns will be similar, it can certainly be a good place to start for seeking out high quality, growth businesses. The proviso is that companies generating above average levels of TSR will often attract premium valuations. With regard to these five superstars, they do all have premium valuations but with expectations of further strong growth ahead, their rocketing share prices could well be justified.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.