Book Review > Top Stocks 2012

Top Stocks is produced every year and is now in its 18th edition having sold around 120,000 copies across all editions according to Martin Roth, its author. It is intended as an objective listing of leading listed companies in Australia which are selected from the top 500 using the following rules:

• each company must have been listed for five years;
• it must have been in profit for five years;
• it must have paid a dividend for five years;
• it must achieve a return on equity (ROE) of at least 10% in the current year; and
• its debt to equity ratio must be no more than 70%.

This gives a set of 102 well performing companies which provides a good starting place for investors wishing to do their own research. There have been numerous changes in this set of companies over the years with only five companies featuring in every edition. The list includes some firm favourites such as the major banks but also some unexpected smaller companies. Martin points out some success stories such as Monadelphous, ARB and Fleetwood from smaller companies featured in earlier editions.

The major part of the book is two pages on each company in alphabetical order giving the latest financial information plus a brief description of the company's business, commentary on their latest results and a discussion on the outlook for the company.

There are 19 tables ranking the 102 companies according to various criteria such as dividend yield. Rather than reading through the book company by company, it is much more interesting to look at some top performers from these tables.

This year there is a free companion e-book “Finding the Top Stocks” (available for Kindle at Amazon) which suggests various market strategies such as 'Growth' or 'Contrarian' that you might consider. It also contains some further interesting tables such as annual Chinese GDP growth and Australian mining capital expenditure for those thinking of investing based on the theme of a boom in resources.

This is a book for investors interested in the fundamentals of companies who approach investing as buying a small part of a business. The whole package is straightforward and eminently sensible and good value at $29.95. One slight quibble is that the making 16 pages or so a separate e-book seems a bit unnecessary as they would have made a perfectly reasonable chapter in the main book.