These 5 stocks smashed the market last week: Should you buy them?

Reliable earnings and dividends point to ongoing success for shareholders in these companies.

Andrew Mudie

Andrew joined the growing team of Motley Fool freelance writers in mid-2013 following years of personal development as a passionate self-taught sharemarket investor. At the time, Andrew was an engineer by trade, writer by hobby, and an investing nerd by passion who spent far too many breaks reading, writing and learning. Andrew’s first investing lesson came with his first stock selection in 2011 when takeover rumours caused a spike and subsequent plunge in the share price of Woodside and then the 21% fall in the market through mid-2011. The next four years of investing saw Andrew dabble in a vast array of strategies until settling on his favourite investment methodology, which is closely aligned with that of the Motley Fool: Fundamentals-based long-term buy-and-hold of great companies at great prices.

Published October 20, 2014 5:42 am AEDT

All investors wish that they could pick the stocks that rise week after week, month after month, even when the market's falling. It's the same for all of us who wish they could pick the lotto numbers, or know the answers to Eddie's Hot Seat questions in advance.

In practice, picking the perfect stock is impossible. Every company's share price will fall at some stage and at some point will underperform the market. Your best bet, as a Foolish investor, is to take a long-term approach by ignoring the short-term fluctuations and focussing on how great (or poor) the business is.

Over the longer term, the best companies are those that have strong, sustainable earnings, quality management, a defendable position in the market (i.e. they have some sort of advantage over their peers), and generally offer some form of consistent dividend payment.

These types of companies will often outperform the market. So when we look at the companies that beat the market over the last week (very short term), it's not surprising that the collection of best mid to large-cap performers are those that possess the above attributes. Over the longer term, these types of companies should have more weeks when they beat the market than lose, which has the impact of compounding investor returns.

Here are five companies that beat the market's 1.5% return last week and have strong futures:

TPG Telecom Limited (ASX: TPM), up 4.5%, Telecommunications
National Australia Bank Ltd. (ASX: NAB), up 3.85%, Banking
CSL Limited (ASX: CSL), up 3.14%, Health
Woolworths Limited (ASX: WOW), up 3%, Consumer
Macquarie Group Limited (ASX: MQG), up 3%, Banking

These companies all have long, profitable futures, and hold some form of competitive advantage over their peers. These are the types of companies that the Motley Fool looks for when making share purchase recommendations.

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