3 stocks that beat the market on Tuesday

Takeovers and director buying can be good news for the share price

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published May 16, 2012 10:11 am AEST

The S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO) fell by 0.7% on Tuesday, to close at 4,266.3 points, following a fall overnight on the Dow Jones Index. Continued uncertainty in Europe and fears of slowing growth in China drove the markets down.

These three stocks managed to beat the market by a comfortable margin. A takeover offer certainly helped in one case.

Hastings Diversified Utilities Fund (ASX: HDF) was up 12.8% to close at $2.38, after a bidding war broke out. Pipeline Partners Consortium made a $1.25 billion offer, valuing the company at $2.35 a share. This bid trumps rival pipeline operator APA Group's (ASX: APA) bid of $2.06, based on APA's closing share price of $4.97. Given the closing price is higher than the latest bid, investors are obviously hoping for a higher bid from APA.

Resmed (ASX: RMD) was up 3% to close at $3.43. Investors appear to have woken up (excuse the pun!) since the company reported its 69^th consecutive quarter of revenue growth. Earnings per share were up 29% in the most recent quarter. Resmed looks expensive, currently trading on a forecast P/E ratio of over 17, given earnings have grown on average at 12% over the last 5 and 10 years.

In comparison, CSL Limited (ASX: CSL) is trading on a forecast P/E of 20.6, but has grown earnings by more than 22% and 23.7% over the last 5 and 10 years respectively.

Primary Health Care (ASX: PRY) rose 2.9% to close at $2.86. They say that director selling can be for many reasons, but there's usually only one reason why a director buys shares, and it's because they are cheap. Founder and chief executive Ed Bateman purchased 50,000 stocks on the 10^th May 2012, taking his total number of shares to more than 36.2m. Other directors have also been buying shares recently. Since November 2011, Primary's shares had fallen 20%, but the share price has recovered 4.4% in the last couple of days.

Other notable risers include Alumina Limited (ASX: AWC) up 2.6% and Spark Infrastructure Group (ASX: SKI) up 2.4%.

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Motley Fool contributor Mike King doesn't own shares in any companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691).Authorised by Bruce Jackson.

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