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It’s been a month since the list of best performing stocks on the ASX for Fiscal Year 2015 was released.  The year over year share price gains ranged from 150% to 62%.  Every investor wants winners in the portfolio and performances like those of the Top Ten raise three questions.  If you own one or more of these stocks should you sell and take some profits or hold for more gains?  If you are still on the outside looking in, is this the time to think about buying?

The answer to those questions is more often than not heavily influenced by personal investing philosophy.  Growth investors often feel stocks on a big roll are likely to keep rolling higher. Bargain hunters and value investors often feel what goes up must come down, especially when share price performance seems to be outpacing fundamentals.

Historical performance can shed some light on the issue of do hot stocks get hotter, stay hot, or cool off.  The following table shows the Top Ten FY 2015 performers with price gains along with gains or losses for the first month of FY 2016 and the gains or losses in share price over two years and five years.  Here is the table.

Company

(CODE)

Market Cap

Share Price (Closing 30 July, 2015)

FY 2015 % Change

1 Month % Change

2 Year % Change

5 Year % Change

Qantas Airways

(QAN)

$8.1

$3.74

+150%

+15%

+200%

+50%

Select Harvest

(SHV)

$932.9m

$13.06

+114%

+16%

+250%

+200%

M2 Telecommunications

(MTU)

$2.0b

$11.00

+85%

+4%

+70%

+450%

Liquefied Natural Gas

(LNG)

$1.5b

$3.14

+78%

-24%

+1200%

+390%

Northern Star Resources

(NST)

$1.2b

$2.08

+75%

-6%

+149%

+3500%

Evolution Mining

(EVN)

$1.0b

$1.045

+75%

-12%

+25%

-25%

Sirtex Medical

(SRX)

$1.7b

$30.37

+72%

-1%

+150%

+500%

Domino’s Pizza

(DMP)

$3.3b

$39.01

+67%

+5%

+250%

+650%

TPG Telecom

(TPM)

$7.4b

$9.44

+63%

+5%

+150%

+400%

Corporate Travel Management

(CTD)

$1.0b

$10.58

+62%

-1%

+150%

+500%

Five of the stocks have kept climbing; two are essentially flat; and three have tailed off a bit.  Two of the three, Northern Star Resources (NST) and Evolution Mining (EVM) are gold miners, so the dip is not surprising considering the beating the price of gold is taking.  Liquefied Natural Gas (LNG) has promising prospects in both the US and Canada but suffers from the declining oil price, since LNG contracts are linked to the price of oil.

One month is little more than a blip on the trading year radar, so let us return to the Top Ten performing stocks for FY 2014 and see how they have fared.  Only two of last year’s Top Ten made the list this year.  Northern Star Resources was up 116% in FY 2014 and Domino’s Pizza (DMP) was up 98%.  Aquila Resources (AQA) made the list but was acquired and no longer trades on the ASX.  Here are the share price movements for the remaining shares over one, two and five years.

Company

(CODE)

Share Price

FY 2014 % Change

1 Year % Change

2 Year % Change

5 Year % Change

Western Areas

(WSA)

$3.09

+99.6%

-36%

0

-40%

Independence Group

(IGO)

$3.86

+97.83%

-19%

+20%

-30%

Bega Cheese

(BGA)

$4.70

+89.9%

-4%

+70%

+150%

Challenger

(CGF)

$7.11

+81.4%

-10%

+65%

+100%

G8 Education

(GEM)

$3.36

+86.2%

-32%

+20%

+400%

Slater & Gordon

(SGH)

$3.46

+85.6%

-26%

+20%

+190%

Aveo Group

(AGO)

$2.77

+84.3%

+32%

+110%

-20%

Including Northern Star and Domino’s we see only three Top Ten performers from 2014 stayed on a roll.  While few, if any, investors make decisions strictly on the basis of share price movement without thought to fundamentals or confirming technical indicators, we think carrying over from one year to the next is an admirable accomplishment.  DMP and NST have kept rolling higher for five years, although NST has had a bit of a bumpy ride.  Here is a price movement chart comparing the two.

Investor sentiment and market hype can drive share price higher for short periods but over time it is earnings that make the difference.  Of this year’s Top Ten performers, seven have double-digit earnings growth forecasts over the next two years.  Here is a table with the earnings growth forecasts along with some valuation ratios.

Company

(CODE)

P/E

(Sector P/E)

P/EG

Forward P/E

2 Year Earnings Growth Forecast

Qantas Airways

(QAN)

12.25

(17.41)

0.22

7.79

+55.6%

Northern Star Resources

(NST)

17.38

(11.41)

0.07

5.47

+119.2%

Evolution Mining

(EVN)

13.4

(11.41)