There’s a pithy quote attributed to American billionaire investor Warren Buffett that describes the essence of what the stock market is all about: “If the business does well, the stock eventually follows.” Of course, there can be many interpretations of what it means for a business to “do well”, but by and large, growth in profits over long stretches of time would be an ideal interpretation. On that front, I decided to check back with history to see which of the current 30 blue chips within the Straits Times Index (SGX: ^STI) has had the fastest growth…
There’s a pithy quote attributed to American billionaire investor Warren Buffett that describes the essence of what the stock market is all about: “If the business does well, the stock eventually follows.”
Of course, there can be many interpretations of what it means for a business to “do well”, but by and large, growth in profits over long stretches of time would be an ideal interpretation.
Turns out, Jardine Strategic Holdings (SGX: J37), Singapore Exchange (SGX: S68), and Jardine Matheson Holdings (SGX: J36) were the shares among the Straits Times Index’s constituents that had the fastest growth in earnings since 2003
|Company||FY 2003: Earnings Per Share||Last 12 Months: Earnings Per Share||% Change|
|Jardine Strategic Holdings||-US$0.021||US$2.74||13,300%|
|Jardine Matheson Holdings||US$0.232||US$4.62||1,895%|
Source: S&P Capital IQ
Jardine Strategic Holdings and Jardine Matheson Holdings, (or “JSH” and “JMH” for short) are both part of the Jardine Matheson Group of companies and are both conglomerates. In particular, JSH holds controlling stakes in a number of other Singapore-listed companies such as Dairy Farm International Holdings (SGX: D01), Hongkong Land (SGX: H78), Mandarin Oriental International (SGX: M04), and Jardine Cycle & Carriage (SGX: C07).
Through these companies, JSH is involved with property development and investment; hotel management and ownership; hypermarket retailing; motor vehicle manufacturing, assembling, and distribution; financial services including insurance and banking; and oil palm plantations, among others.
Meanwhile, JMH also has its fingers in the same pies through its controlling stake in JSH (it should also be noted that JSH itself owns a majority stake in JMH, setting up a very complex web of inter-ownership among the various members of the Jardine Matheson Group).
Elsewhere, Singapore Exchange (or “SGX” for short) is the owner and operator of the derivatives exchange and Mainboard and Catalist stock exchanges here in Singapore.
As seen in the table above, JSH, SGX, and JMH have seen stupendous earnings growth over the past 10-plus years. But why go through the trouble of sifting through past data though? Here’s why:
|Company||Price on 2 Jan 2003*||Price on 9 Dec 2013||% Change|
|Jardine Strategic Holdings||US$2.151||US$32.10||1,392%|
|Jardine Matheson Holdings||US$4.47||US$51.79||1,058%|
|Straits Times Index||1,336||3,114||133%|
|*Except for the Straits Times Index, prices on 2 Jan 2003 are adjusted for cash dividends, stock-splits, rights offering, and spin-offs.|
Source: S&P Capital IQ
All three companies have had tremendous total returns for their shares in a reflection of the growth in their profits. Their returns had also outperformed the broader market, as represented by the Straits Times Index, by a huge margin.
While history is never a guarantee of future performance, it does give us clues on worthwhile targets for future research and in certain cases, can also be a good predictor of what we can expect going forward.
Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.
The Motley Fool’s purpose is to help the world invest, better. Like us on Facebook to keep up-to-date with our latest news and articles.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.