One of the most consistent stocks for many years, Halma is proving its worth in our seasonal portfolio.
Investors seeking a definition of stock market consistency need look no further than today's results from Halma (LSE:HLMA), with the FTSE 100-listed conglomerate showing the kind of performance that has helped it grow its dividend by 5% or more for 40 years in a row.
This hugely impressive stock, whose products have been protecting and improving life for people worldwide for 45 years in total, delivered interim figures ahead of City expectations to send its shares soaring by 12% to a record high at 2,129p.
That's more good news for followers of the interactive investor Consistent Winter Portfolio, which Halma has joined for the first time and is already making a favourable impression.
In just the first 19 days of the 2019/20 edition, the Consistent portfolio is up by 5.7% compared with 2.2% for the benchmark FTSE 350 index. Halma leads with the way with 12% growth as at Tuesday lunchtime, closely followed by Howden Joinery (LSE:HWDN) up nearly 9%, with Hill & Smith (LSE:HILS) and InterContinental Hotels Group (LSE:IHG) also stronger.
Including Croda International (LSE:CRDA), which is down a fraction so far, the five members of the Consistent Winter Portfolio all boast unbroken 10-year records of positive returns for the winter period. In the case of Halma that averages at 14.9%, reflecting a trend of record annual revenue and profit for 16 years in a row.
Source: TradingView Past performance is not a guide to future performance
Growth continues from across all four operating divisions, with today's revenues of £653.7 million being 2.8% ahead of City consensus and adjusted profits of £128.8 million coming in 5.3% stronger than forecasts and 14% higher than the previous year.
Given this kind of performance and long record of upward share price growth, it shouldn't come as a surprise to find that Halma's shares are not cheap. According to analysts at UBS, Halma last night traded with a projected 2020 price earnings (PE) multiple of 31x.
That's likely to put off many investors, with UBS's target price of 2,060p now up with events and Morgan Stanley more cautious at 1,600p. But we've been here a few times before, given that we wrote about the stock in June 2018 when Halma wasn't looking cheap at just over 1,400p!
As the experts at UBS point out, Halma benefits from being one of the less economically sensitive companies in its coverage. That said, any acceleration in economic growth could have a favourable impact on forecasts, particularly given the high barriers to entry for rivals.
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Halma's products often sit inside the systems of world leading equipment manufacturers. If you step into an elevator, for example, there's a 50% chance that they are fitted with Halma sensors that bounce back if they detect an object.
Its environmental products protect water networks supplying billions of people around the world and measure air quality in cities. In medical devices, Halma helps spot preventable diseases, monitor blood pressure and restore lost eyesight.
Its infrastructure safety products protect people and enable safe movement in buildings and public spaces, while its process safety products detect hazardous gases and prevent explosion on energy platforms and pipelines.
This adds up to a current portfolio of 40 or so subsidiary companies operating worldwide. The portfolio structure enables Halma to easily integrate new acquisitions as well as to merge or sell businesses should the longer-term market potential change adversely, ensuring that Halma can grow rapidly without becoming too complex.
Three acquisitions were completed in the first half with two further deals added since the period end. Its robust balance sheet should support further investment, with net debt of £310.4 million leading to a debt-to-earnings ratio of 0.98 times.
Andrew Williams, who has been CEO since February 2005, said: "Halma remains on track to make further progress in the second half of the year and deliver another good full year performance." He announced a 7% increase in the interim dividend to 6.54p today.
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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.