What we can learn from Britain’s "Dashing Dozen" stocks
Stocks that consistently outperform the stock market are clearly doing something right, says Dr. Mike Tubbs. What can we learn from the UK market’s top performers, and which ones are still buys?
Past performance is not a reliable guide to the future. However, investors’ portfolios can benefit from UK shares that have consistently and substantially outperformed the stock market. One of the best ways of measuring consistent outperformance is to select several different time periods, over all of which a company’s shares should have outrun the market.
We will take one-year, six-year and 12-year periods and look for companies that have gained more than the FTSE 100 over all three time spans. Six and 12 years are chosen since five years would take us back to 2020, when stocks were slumping owing to Covid. It is more reliable to measure growth from 2019 to 2025.
Taking 16 April 2025 as our reference date (after stocks reacted to Donald Trump’s tariffs), the FTSE 100 had gained 5.8% over one year, 11.6% over six and 28.7% over 12 years. There are at least 12 British companies from several different sectors that have easily beaten the blue-chip index over all three periods. We will discuss these 12, examine the reasons they have done so well and gauge whether their outperformance will continue.
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Two stocks leading the pack
Two companies from the 12 stand out as having exceptional outperformance. These are Games Workshop and 3i Group, both FTSE-100 firms. Games Workshop has gained 45% in a year, 248% over six years and 1,997% over 12 years. In 3i’s case, its shares have gained 48% over one year, 287% over six years and 1,161% over 12 years. Games Workshop’s gains are even better than those of Magnificent Seven US firms, such as Amazon, with -4%, 73% and 1,230% over one, six and 12 years, respectively and Alphabet (Google’s parent company) with -4%, 145% and 615%. The gains made by 3i beat Alphabet over all three periods and Amazon over all but 12 years.
Games Workshop’s best-known product is the Warhammer series of games. Hobbyists of all ages enjoy collecting, modelling, painting and tabletop-gaming with their miniatures. This hobby is global and supported by a wide range of books, audio books, electronic games and Warhammer TV. Games Workshop supplies its global hobbyists through its own stores or trade outlets, and by licensing its deep and extensive range of intellectual property. It has just concluded negotiations with Amazon for adapting the Warhammer 40,000 universe into films and TV series, together with associated merchandising rights.
3i Group is an investment company specialising in private equity and infrastructure. It invests in mid-market companies in Europe and North America. Its private-equity (PE) portfolio has over 50 companies, with about half that number in the infrastructure portfolio. Action is an example of 3i’s PE portfolio companies. Based in the Netherlands, it is the fastest-growing non-food discounter in Europe with 2,918 stores in 12 countries. Action reported sales growth of 10.3% for the year to December 2024 and paid a dividend of £215 million to 3i, leaving it with a cash balance of €814 million.
Defence stocks
Our 12 companies include three from the aerospace and defence sector: BAE Systems, Cohort and Rolls-Royce. All three have benefited from the realisation by major European countries that they can no longer regard the US as a reliable ally, given Donald Trump’s behaviour since taking office in January. European countries have realised that they need to increase their support for Ukraine and raise their defence budgets to over 3% of GDP – a figure that, among large countries, only Poland exceeds at present, with 4.2%.
It is raising this figure to 4.7% this year. The UK government has pledged to raise its defence budget from 2.3% to 2.5% of GDP by 2027 and to 3.5% after that. Other European countries are also making substantial increases. These changes have led to sharp increases in the share prices of European defence companies since early January this year.
Cohort is a group comprising seven innovative firms providing satellite, military and naval communications; advanced electronic and surveillance technology; data technology; and naval sonar systems. One of these seven is EM Solutions, an Australian developer and producer of high-end satellite-communications terminals for naval and defence customers. Australia is an increasingly important defence market, as highlighted by the recent AUKUS agreement. Cohort’s share price has risen 68% over one year, 237% over six years and 863% over 12.
BAE Systems designs and makes a broad range of defence equipment for global customers. Offerings include land, sea and air systems, with products such as combat vehicles, artillery systems, complex naval surface ships and fighter jets. The group also focuses on military electronics, intelligence and cybersecurity.
The company develops the future technologies on which new products are based and also offers a full spectrum of services from engineering to information management. One example of a future technology is the Tempest programme, which is a joint British, Italian and Japanese collaboration to develop and manufacture an advanced fighter jet independent of the US. It will incorporate a wide range of new technologies. BAE’s share price is up 32% over one year, 253% over six years and 364% over 12 years.
Rolls-Royce has three divisions. In defence, it is the market leader in military aircraft engines, naval propulsion and nuclear propulsion for submarines. When it comes to civil aerospace, it produces engines for large commercial aircraft, regional and business jets. Its power systems business includes power generation for data centres, manufacturing and utilities.
Rolls is developing small modular nuclear reactors (SMRs) to provide a low-cost, clean power source – each SMR being capable of powering a million homes for 60 years. Rolls has been selected as the supplier of sets of SMRs for the UK, the Czech Republic and the Netherlands, and is shortlisted for orders in Sweden. The share price is up 82% over one year, 131% over six years and 87% over 12 years.
Data providers
Our 12 companies include two major providers of data, RELX and London Stock Exchange Group (LSEG). RELX provides leading content and data sets with information-based analytics and decision tools to customers in 180 countries. For example, the legal profession is served by LexisNexis, which hosts over 161 billion documents and provides searches, analytics and AI capabilities. RELX is up 18.5% over one year, 123% over six years and 421% over 12 years.
LSEG comprises three major divisions. One is data and analytics, which includes trading and banking, enterprise data, and investment solutions, including indices. It makes up 63% of profits. Then there is the capital markets division, focusing on equities, foreign exchange, and fixed income. The post-trade arm covers derivatives, securities and reporting. LSEG’s shares are up 24.4% over one year, 127% over six years and 821% over 12 years.
Engineering stocks
Two engineering companies in our 12, Diploma and Halma, have grown steadily through both organic growth and successfully integrated acquisitions. Halma has a magnificent record of having raised its dividend at least 5% every year for 46 years.
Diploma has three main arms – controls, seals and life sciences – which all supply specialised products and services to sectors such as healthcare and environmental management. Offerings include industrial automation equipment, specialised cables, adhesives, fasteners and controls. The group made two acquisitions in each of 2023 and 2024. Diploma’s shares are up 8.5% over one year, 139% over six and 570% over 12 years.
Halma consists of 55 decentralised businesses operating in three segments: safety, environmental and analysis, and medical equipment. Halma buys small and medium-sized firms to secure the leading market share in a range of niche markets. It has acquired 55 companies, but also invests strongly in research and development (R&D) to ensure its products rate as the best available in their niches. Its shares are up 21% over one year, 48% over six and 433% over 12 years.
Specialised engineering and retail
Our specialised engineering businesses are Concurrent Technologies in electronics and Goodwin in mechanical and refractory engineering. Concurrent supplies the aerospace and defence, telecoms, transport, scientific and industrial sectors with high-end embedded computer products. Products are made to perform reliably in extreme conditions, such as shock, vibration and extreme temperatures/humidity. Concurrent’s shares are up 83% over one year, 99% over six years and 221% over 12 years.
Goodwin’s mechanical engineering consists of the manufacture of high technology castings, valves, antennae and pumps. Clients include the aerospace and defence, mining, oil and gas, water and power-generation industries. Goodwin Steel Castings makes specialised castings for frigates and submarines.
The refractory engineering arm makes refractory powders and processes them for the jewellery, aerospace and fire-protection industries. Four of five directors are members of the Goodwin family, and 56% of the shares are family-controlled. Goodwin’s shares are up 12.7% over one year, 129% over six and 230% over 12 years.
Next is a top-class retailer. Sales jumped 32% between 2021 and 2024. Next sells clothing, accessories, footwear and home products and operates through three main segments: Next online, Next retail and Next finance. I remember interviewing Simon Wolfson, Next’s CEO, along with other CEOs and chairmen for the UK government’s business department when I was a senior industrialist there. I was impressed by both his grasp of detail and his clear strategic thinking, and he has guided Next’s profitable growth. The shares are up 36% over one year, 108% over six years and 175% over 12 years.
How do our 12 stocks compare?
The share price growth of all 12 companies discussed above has vastly exceeded that of the FTSE 100. The FTSE grew 28.7% over 12 years, but eight of our 12 stocks grew more than 10 times as much (more than 287%). The FTSE grew 11.6% over six years, but 10 of our 12 rose over 10 times faster.
Given that the FTSE 100’s performance is modest, it is interesting to compare our 12 companies with America’s S&P 500, which has gained 4.4% over one year, 79% over six and 230% over 12 years. Over 12 years, eight of our firms beat the S&P and one equalled it. Over six years, 11 of our 12 beat the S&P and, over one year, all 12 beat the S&P 500.
Our 12 businesses are all profitable and all pay dividends. However, all invest in growth, so forward dividend yields are modest, ranging between 1% and 2%. The highest forward yield is from Games Workshop, with 2.72%.
Valuations and growth drivers
Games Workshop (LSE: GAW) is on a forward price/ earnings (p/e) ratio of 32. In the six months to 1 December, 2024 revenue rose 21% and operating profit 34%. The firm continues to grow briskly and there is still ample scope for it to exploit its intellectual property to expand its licensing income.
3i Group (LSE: III) has a forward p/e of nine. The 2024-2025 results to 31 March delivered an increased return on shareholders’ funds of 25%, while net debt was down to £771 million; gearing was 3%.
Cohort (LSE: CHRT) has a forward p/e of 25.8. The results for the half year to 31 October 2024 showed sales up 25% at £118.2 million, while the order book jumped 53% at £541 million. The May trading update reports strong revenue and profit growth.
Rolls-Royce (LSE: RR) has a forward p/e of 39. In 2024 sales grew 17% to £18.9 million and underlying operating profit rose 53%. Cash-flow growth of 88.7% enabled a £1 billion share-buyback programme for 2025. The 2025 outlook was upgraded. There are clear growth drivers for all three segments.
BAE Systems (LSE: BA) has a forward p/e of 25.8. The 2024 results show sales up 14% to £28.3 billion, underlying EBIT of £3 billion and an order book of £60.4 billion (over two years of sales).
RELX (LSE: REL) sells for 30 times forward profits. The 2024 results show sales up 14.7% to £18.9 billion, operating profit up 49.7% to £2.9 billion and net cash of £475 million.
London Stock Exchange Group (LSE: LSEG) has a forward p/e of 26 at a share price of 10,675p. The 2024 results show income up 6.1% to £8.5 billion, operating profit up 6.7% to £1.5 billion and free cash flow of £2.2 billion. The first products from the partnership with Microsoft are now reaching customers, with more planned through 2025.
Halma (LSE: HLMA) has a forward p/e of 31 at a share price of 3,206p. Halma completed seven acquisitions in the year to 31 March, has a healthy acquisition pipeline and a strong balance sheet to fund it. It delivered record 2024-2025 revenue up 11% at £2.25 billion, with EBIT up 12% at £411 million and the total dividend up 7% . This is Halma’s 22nd consecutive year of record profits. Net debt to EBITDA was reduced to 0.97 (down from 1.35 a year ago). Halma says it has made a strong start to its new financial year.
Diploma (LSE: DPLM) has a forward p/e of 27.8. The full year results to 30 September 2024 showed sales up 13.6% to £1.36 billion and operating profit up 11.3% to £207 million. The May interims showed sales up 14% with the operating margin climbing to 21.5%.
Goodwin (LSE: GDWN) has a trailing p/e of 29. Revenue for the year to 30 April 2024 was £191 million with operating profit of £26.9 million and net debt of £35.4 million. The March 2025 trading update reported that the order book had reached a record £300 million and that both the mechanical and refractory divisions are seeing strong growth, with debt cut by a further £10 million.
Concurrent (Aim: CNC) has a forward p/e of 29 at a share price of 193p. The results for 2024 show record sales up 27% at £40.3 million, pre-tax profit up 40% to £5.2 million and cash climbing 23% to £13.7 million. The company says that 2025 has started strongly in terms of both output and orders.
Next (LSE: NXT) has a forward p/e of 17. Revenue to 31 January 2025 was up 11.4% to £6.12 billion, with operating profit up 12.7% to £1.09 billion (exceeding £1 billion for the first time). Growth is driven through the Next brand, the Next online platform and product development. Next’s branded sales through its international websites have grown 350% over the last ten years and sales through third-party platforms now account for 30% of global sales.
Selecting your stocks
Given these 12 firms’ excellent growth records, it is no wonder seven of the 12 have forward p/es between 25 and 30, three over 30, one between 15 and 20, and just one, 3i Group, below 10 (9). A diversified group of five or six stocks for investment might include Games Workshop, one of the three defence companies, one of the two data companies, one or two of the four engineering companies and either Next or 3i.
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Highly qualified (BSc PhD CPhys FInstP MIoD) expert in R&D management, business improvement and investment analysis, Dr Mike Tubbs worked for decades on the 'inside' of corporate giants such as Xerox, Battelle and Lucas. Working in the research and development departments, he learnt what became the key to his investing; knowledge which gave him a unique perspective on the stock markets.
Dr Tubbs went on to create the R&D Scorecard which was presented annually to the Department of Trade & Industry and the European Commission. It was a guide for European businesses on how to improve prospects using correctly applied research and development.
He has been a contributor to MoneyWeek for many years, with a particular focus on R&D-driven growth companies.