These shares have grown on average 196% this year: Wey Ed, IQE, Jersey O&G, Purplebricks, Taptica, HCM, Plus500 and FEVR
Companies: FEVR, HCM, IQE, JOG, PLUS, PURP, TRMR, WEY
Our core users' Picks at the beginning of 2017
Back in January, we released a series of articles which outlined some of the companies the users of our (then offline) Stock Pick League had chosen as their Stock Picks for 2017. The articles covered sectors including Tech and Software, Construction and Finance, Hospitality and Household Goods, as well as Energy and Pharma/Biotech.
Our pool of core investors in which we aggregated the picks was mainly made up of Sophisticated or High Net Worth private investors, who we invited to play our Stock Pick League for a bit of fun whilst in beta mode.
The Stock Pick is now live, and you too can now play along. By joining our Stock Pick League you can discover the stocks each player has chosen and how they've all performed.
Some of their Picks have performed exceptionally well in 2017, and some not so much, but overall the group has comfortably outperformed the market with a 22% gain year-to-date.
We thought it would be a good idea to revisit these lists and see which of our market-savvy investors were on the money, literally.
At the time of writing, these 8 companies, which cover several sectors including education, tech, oil & gas, pharmaceutical and digital media, have averaged 199% growth rate this year. The median growth rate is 160%. Not bad.
Who made the list?
So who are these 8 companies? The list includes:
- Wey Education (WEY),
- IQE (IQE),
- Jersey Oil and Gas (JOG),
- Taptica (TAP),
- Purplebricks (PURP),
- Plus500 (PLUS),
- Hutchison China Meditech (HCM), and last but not least,
- Fevertree Drinks (FEVR)
Some of the names on this list you may be familiar with, some you may not. However different these companies are in what they do, they all have one thing in common ... They have made, and continue to make, money for their shareholder's.
Let's delve into each company to see what they do, how they've performed, and why they've outperformed the market this year.
Please note all figures are correct at the time of writing (October 2017).
Wey Education (WEY)
2017 share price gain to date: 485%
Share price: 20p
Sector: Support services
Market Cap: £21m
#Shs Outstanding: 104m
PE ratio: N/A
IPO'd: Dec '15
What is Wey Education?
According to its website, "Wey Education is the holding company of an educational group providing services online worldwide. Wey operates two online schools, (InterHigh and Infinity Education), a B2B division serving other educational companies and schools (Wey ecademy), and an online language school teaching English as a Foreign Language (Quoralexis)."
Why the spike?
WEY's share price remained relatively flat in the 12 months post-IPO in December 2015. The stock spiked in February 2017 after the release of a trading update that announced 65% growth in turnover. It later spiked again in July and August after a Private Investor Evening in mid-July, where it:
- Outlined the Group's existing business,
- Demonstrated its new teaching platform, and
- Gave information about its growth plans, including its development model for the less developed world, as well as its plans for the use of AI in its services.
In the six months to August, the stock grew from a price of 4p to a peak of 26p. One thing to note is it is an incredibly illiquid stock. Looking at recent volumes it has only turned over c.£5,000 per day in shares.
WEY is a small-cap with a market valuation of £20m, which is expected to report its first net profit for FY17 (year end August). Its highly-anticipated results are expected to be announced later this month, with consensus forecasting a Profit of £0.35m from Revenues of £1.5m. However, the company has stated revenues should exceed £2.4m. Last reported cash balance was c. £1m and the stock currently trades at 19p.
WEY share price growth. Source: Google
2017 share price gain to date: 229%
Share price: 137p
Market Cap: £863m
#Shs Outstanding: 685.9m
PE ratio: 33x
IPO'd: Sept '03
What is IQE?
Cardiff-based IQE is a manufacturer of epitaxial wafers for their use in semiconductors. In simpler terms, they design and create components that are used in microchips developed for a wide range of technologies, including wireless communications, solar, infrared systems, and LED lighting, to name a few.
Why the spike?
IQE gained widespread media coverage earlier this year as the "little-known Welsh manufacturer" whose product was the technology behind Apple's 3D-tracking feature in its new iPhone8, one of the handset's biggest selling points.
After doubling in price in 2016, IQE continued its run as a darling stock for its shareholders this year, growing 316% from its January 3 price of 38p to its all-time high of 158p in September shortly after the release of its Interims. It has since settled at a price of c. 137p.
In the five years to 2016, Revenue and Net Profit grew at an average of 12% and 18% YoY respectively, while operating margins averaged 10% for the same period. The current fiscal year will finish in December.
Earlier this year, one of our sophisticated investors who selected IQE for the Stock Pick League said:
"I chose IQE because the business is growing strongly and on a modest rating. I have held it since August or so. Given the forex change, it could also make an attractive takeover target."
A semiconductor. Image : TechChunks
Jersey Oil and Gas (JOG)
2017 share price gain: 190%
Share price: 2983p
Sector: Oil and gas
Market Cap: £33m
#Shs Outstanding: 9.9m
PE ratio: N/A
IPO'd: March '11
What is Jersey Oil and Gas?
Jersey Oil and Gas is, as the name suggests, an oil and gas company headquartered in Jersey whose focus is in the North Sea. it has two sites, namely Athena and Verbier, which it announced on September 11 were both dusters, causing the stock to collapse.
Why the spike?
While many investors would have written the stock off, those who bought immediately after the crash have made strong gains as JOG announced days later drilling had commenced at a sidetrack at Verbier, and then the announcement last week said the sidetrack had found oil, causing shares to surge 430% in one day.
The share price at the time of writing is trading not much below its three-year high at 298p, representing a 540% rise from its recent lows and a 17% hike from the share price before last month's collapse.
At the time of writing, JOG had a market cap of £28m, clambering back from its low of £5.5m thanks to news that the Verbier sidetrack had uncovered an oil accumulation with an estimated range of "between 25 and 130 million barrels of oil equivalent," with a minimum proven volume of 25 million barrels.
We would caution that there is still a long way to go before commerciality can be established. Statoil is Operator on the field, in which JOG has an 18% stake. It will need to test the core samples and a flow test will be required before the Group can establish whether the field will flow economically. Still, it is quite the recovery from a month earlier.
JOG's Verbier rig. Image: Statoil
2017 share price gain: 160%
Share price: 453p
Sector: Multiservice media
Headquarters: Tel Aviv, Israel
Market Cap: £279m
#Shs Outstanding: 61.8m
PE ratio: 14x
IPO'd: May '14
What is Taptica?
Taptica International is an American-founded, Israeli-based, UK-listed, demand-side Adtech platform. The Company’s technology is based on artificial intelligence, machine learning, as well as big data.
TAP uses these technologies to target users with very specific ads suited to them based on a broad range of criteria. The company handles an incredible 22 billion requests per day in 15 countries. It uses user data from 17,000 campaigns, 600 clients, and has profiles on 220m users to help target people with effective messaging.
It has an impressive list of clients, working with more than 600 advertisers including Disney, Amazon, Facebook and Twitter, to name a few. It also works with more than 50,000 supply and publishing partners worldwide.
Why the spike?
Taptica is benefitting from the recovery in the Adtech industry and the shift to mobile and has upgraded its earnings forecasts a number of times in the past two years. Investors continue to be wooed by the Group's impressive profit growth, increased margins, strategic acquisitions, increased global reach, notable return on equity and its robust balance sheet.
Back in May, we wrote about Taptica to see if it was still worth investing in given its then 360% price rise, which you can read here.
Also worth a read is our article on the changing Adtech landscape, and the companies exposed to the benefits these changes are bringing about, including Taptica.
TAP's Revenue and Net Profit for the five years to 2016 have enjoyed an average 44% and 42% YoY growth respectively, while EPS has also grown an average 42% YoY in the same five years. Operating margins have averaged 14% in the same period, and its cash balance is strong at c. £32m.
Given these impressive figures, TAP only has a PE ratio on par with the industry median, 14x, which may look surprising at face value given the stock's rally over the past 18 months or so. However, non-UK AIM-listed stocks tend to trade at a discount to their British peers, whilst the uncertainty in earnings that has hindered the Adtech industry in the past may also play into this.
The adtech industry continues to shift to mobile. Image: Mashable
2017 share price gain: 159%
Share price: 366p
Sector: Real Estate
Headquarters: West Midlands
Market Cap: £946m
#Shs Outstanding: 272m
PE ratio: N/A
IPO'd: December '15
What is Purplebricks?
Purplebricks is an industry-disrupting real estate agent platform that has had significant hype surrounding it since its admission to trading in December 2015. Purplebricks operates by offering a much lower fee to sell a client's property, which is charged whether the property sells or not.
This differs to a traditional agent who only charges a fee if the property sells, albeit at a much higher rate.
If a property is sold, much of the post-contract phase of the sale is up to the seller, with support along the way from Purplebricks. Whilst it may sound daunting, it can save a seller more than 50% compared to using a regular agent, and the model seems to be proving popular in several markets.
Since its IPO, Purplebricks has taken the UK real estate market by storm, and has since begun operating in Australia, and more recently, the USA.
Why the spike?
Whilst 'disruptor' is a buzz word every startup likes to describe itself by, Purplebricks is undoubtedly a genuine market disruptor to the once stagnant real estate industry. PURP was a Stock Pick for our CEO, Rob, who commented in January's article:
"The size of the opportunity vs the current market cap is enormous. PURP only account for less than 3% of UK transactions and the opportunity in Australia is also significant. Estate agencies have been charging too high a fee for the service they provide in my view for a long time, and a platform offering like PURP could reshape the landscape.
The bull case is not that it takes over the market, like a Just Eat. That is too optimistic in my view. But in the process of reshaping the industry it is a reasonable position to assume PURP wins a decent market share. That would put it on a multiple of current valuations."
Zeus Capital gave three reasons for their positive stance on the stock in its research note following the Group's trading update in September, saying:
"1) Purplebricks UK is growing very fast and profitably. 2) Purplebricks Australia is on track to break even in November 2018 (after 15 months trading) and will be a similar sized unit to Purplebricks UK. 3) Purplebricks’ USA, which is developing more quickly than either the UK or Australia, has the potential to be many times larger than the rest of the group."
In its first year of trading, PURP reported Revenues of £3m, swelling to £19m the following year and £47m in FY17. Consensus forecasts the Group's incredible growth to continue into the future, with Revenues forecast to reach £97m in FY18 and £168m in FY19 as its market share across the UK, Australia and the US continues to expand.
Its cash position is strong at £71m, and its market cap is £946m. The Group is forecast to turn its first Net Profit of £3m in FY19 from Revenues of £168m.
Given PURP is yet to swing to a full-year profit, there is no PE ratio. On the basis of the 2018 forecast revenue mentioned above, it is trading at c.10x revenue. This is a high multiple, but not unusual for a stock experiencing strong growth.
Purplebricks is changing how we sell homes forever. Image: ft.com
2017 share price gain: 158%
Share price: 954p
Sector: Investment platforms
Market Cap: £1bn
#Shs Outstanding: 114m
PE ratio: 9x
IPO'd: July '13
What is Plus500?
Plus500 is a trading platform which enables customers to trade on movements in the price of shares, indices, commodities, forex, exchange-traded funds (ETFs) and options, without having to buy or sell the underlying instrument.
The Group was founded in 2008 and has become one of the UK's largest CFD trading platforms with a portfolio of over 2000 instruments.
Why the spike?
Before the FCA and other regulators announced their proposals to improve the CFD market, PLUS500 was trading on a cheap multiple compared to its peer group of IG Group and CMC. PLUS was paying a dividend which gave it a yield of c. 10%, and traded at PE multiple of 7x, much less than IG's 15x and CMC's 10x.
In the months following the announcements from the regulators, market fear of the impact from the clampdown by the likes of the FCA abated. PLUS continued to deliver robust cash generation and its business model was shown to be incredibly flexible as a drop in revenue was matched by a drop in marketing spend during a period of low volatility, hence EBITDA and cash generation was preserved.
PLUS currently trades at an all-time high price of 954p, which represents an 86% price gain from before the December '16 FCA clampdown scare. It now has a PE ratio of 9x and a market cap of £1.1bn, with both Revenue and Net Profit averaging growth of 45% in the five years to 2016.
For an in-depth look at CFD platforms, read our Naked Fund Manager article on the valuation of Plus 500, IG Group and CMC.
The Plus500 trading interface. Image: Youtube
Hutchison China Meditech (HCM)
2017 share price gain: 96%
Share price: 4562p
Headquarters: Hong Kong
Market Cap: £2.7bn
#Shs Outstanding: 61m
PE ratio: N/A
IPO'd: May '06
What is Hutchison China Meditech?
Hutchison China Meditech, or Chi-Med, is a Chinese biopharmaceutical company developing therapies for oncology and immunological disease. The Company has commercialised five of its products, which help treat issues such as heart disease, mental illness as well as cold and flu medicines. Chi-Med is also listed on the Nasdaq Global Select Market
Why the spike?
The stock began to rally in March this year with the news its Fruquintinib cancer treatment had succeeded at the Phase III level, bringing it a step closer to commercialisation. Shares continued to grow throughout the year with several more announcements, including the June announcement Fruquintinib's NDA submission had been approved by the China Food and Drug Administration (CFDA).
In January, one of our Stock Pickers gave us their reasoning for choosing HCM as a pick:
"Shares underperformed in 2016 following the fund raise on Nasdaq in March and therefore do not reflect the progress, and value created, in progressing the developments within its drugs pipeline during 2016, the full implications of which will become apparent as the results of the seven late-stage trials that the company is undertaking are released during 2017.
[I] believe there is considerable scope for outperformance."
The Group is currently valued at c. £2.7bn with a strong cash balance of £112m and FY17 Revenue expected to grow 11% on FY16 to £235m. It has a price-to-book value multiple of 19, well above the industry median of 3x.
HCM share price growth. Image: Google
Honourable mention - Fevertree Drinks (FEVR)
2017 share price gain: 91%
Share price: 2156p
Sector: Non-alcoholic drinks
Market cap: £2.5bn
#Shs Outstanding: 115m
PE ratio: 59x
IPO'd: November '14
Whilst there were companies who have experienced slightly stronger growth this year so far, we thought Fevertree Drinks was worth an honourable mention in our list, not just because its share price has grown over 90% this year alone, but it has basically been rallying since the day it was admitted to trading.
Fevertree Drinks are London-based a producer of posh tonics, ginger beer and other mixers who have become incredibly popular since the company started in 2004.
Since the Group's IPO in November 2014, shares have risen c.1,200%, an incredible investment. In terms of fundamentals, its growth has been relentless with Revenues growing an average of 54% YoY while Net Profit year on year has grown on average 64%. Operating margins for the five years to 2016 have averaged c. 25% and have grown from a low of 13% in 2013 to 34% in 2016.
It was a firm favourite for a number of our Stock Pickers with the below rationales from two investors:
Its PE is high but the PEG is only.32. The USP niche premium products not affected by GBP weakness and has USD exposure.
Highly rated, well-managed company in long-term growth sector with a track record of consistently beating market expectations – which I expect to continue during 2017 starting with its next update on trading for the year ending Dec 2016 towards the end of January.
Some of the Fevertree range. Image: Shares Magazine