Three stocks that have risen by 50% or more since January

Have these stocks soared too high?

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 July 17, 2012 12:56 pm AEST

The All Ordinaries index (Index: ^AXAO) (ASX: XAO) has risen just 0.2% since the start of the year, mainly due to ongoing global economic issues, and investor fears over slowing Chinese growth, falling commodity prices and a weak US economic recovery.

These three industrial stocks have all risen by 50% or more, and not because of any takeover offers.

G8 Education Limited (ASX: GEM) has seen its share price rocket up 70.2% year-to-date. The company operates childcare centres, and as I mentioned earlier this year, appears to be following ABC Learning's example. Just two weeks ago, G8 announced that it had activated a new $56.5m debt facility, which was used to partially repay an existing debt facility, and the remainder is likely to be spent on further acquisitions. Investors will be hoping G8 doesn't end up like ABC.

Breville Group Limited (ASX: BRG) has climbed 60.4% since the beginning of the year. The small electrical appliances provider reported a 40% jump in net profit and earnings per share despite revenues falling by 1%. More than half the company's revenues now come from outside Australia, with roughly a third coming from North America, and growing despite the weak US economy. The company expects earnings before interest, tax, depreciation and amortisation (EBITDA) for the 2012 financial year to be between $65m and $67m. Currently trading at $4.41 on a trailing P/E ratio of 14.3 and dividend yield of 4.4%, Breville looks fairly priced.

Southern Cross Electrical Engineering Limited's (ASX: SXE) shares have risen by 50.0%, with the share price currently trading around $1.29. The company provides specialised electrical, control and instrumentation installation and testing services to the resources, energy and infrastructure sectors. Management is projecting the company to grow in the short to medium term, following a near 80% jump in revenues for the six months to December 2011. Analysts are expecting earnings per share to double in 2012-13, on the back on potential extensions to existing projects and the award of new contracts. With a net cash position and margins over 20%, Southern Cross could be a stock worthy of further research.

By comparison, many of the worst performers in the All Ords index were resources stocks, such as Mirabela Nickel (ASX: MBN) down 77%, Voyager Resources (ASX: VOR) down 71% and Aquarius Platinum (ASX: AQP) down 70%.

The Foolish bottom line

The resources sector and speculative explorers have been the stocks to avoid so far in 2012. Of the seven fund managers that posted positive returns for the 12 months to June 2012, many of them stuck to tried and true methods of selecting stocks with strong balance sheets, paying decent dividends at cheap prices, and avoiding resources stocks.

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Motley Fool writer/analyst 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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