Sometimes the best performing stocks are the least expected.
Since around the start of June, the S&P/ASX All Ordinaries Index (ASX: XAO) (Index: ^AORD) has climbed about 4.2%. However, Caltex Australia Limited (ASX: CTX) and Myer Holdings Ltd (ASX: MYR) have exceeded the index's gain and beaten out many other big companies post-reporting season.
But that's investing for you. When industries or companies are out of favour, or they're experiencing short-term weakness, many investors move on. Foolish investors, on the other hand, double back on these stocks to see what opportunities they offer.
— Myer Holdings
The department store operator has been absent in the news since David Jones was gobbled up by South African Woolworths Holdings Limited (Johannesburg: WHL). The stock slipped down to $2 in June, yet since then has rallied 24% to $2.48. Consumer sentiment has been soft and retail sales have struggled.
Myer Holdings should report full year results in September, so watch for earnings. For me, the department store space is still troubled, so I would prefer specialty retailers like JB Hi-Fi Limited (ASX: JBH) that can benefit more from the growing housing market. However, Myer has made an impressive gain recently and shouldn't be ignored.
— Caltex Australia Limited
The oil refiner and petrol distributor/retailer reported a half-year net profit of $163 million on a historical basis, down 17%. The company is converting its refinery facilities in Sydney into an oil import terminal and is moving into a role as a distributor. This move could actually improve margins since refining isn't as profitable as it once was.
Other newer refineries in South East Asia can produce at a lower cost, so Caltex is focusing on distribution. People and businesses will always need to buy petrol. The stock has climbed 30.5% since early June, hitting an all-time high of $29.18 this week. Because the recent rise is almost a vertical movement, late investors may be driving it up too much. I wouldn't chase this one. If you are interested in Caltex, then wait for a pullback. There's no need to rush in.
The gains of both companies have been impressive. However, considering what their long-term prospects might be is always important. I believe there are stronger stock picks out there than these two.
For example, there is one small company that the Motley Fool has dubbed "The Top Stock of 2014 – 2015". This stock has reliable growth and good results recently.
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