Up 1,347% in 5 years! Investors are forgetting how explosive FTSE 100 stocks can be
FTSE 100 stocks are sorely underestimated, in my view. Many investors see UK blue-chips as solid but sluggish, and easily outpaced by the US tech giants.
We certainly donât have anything quite like the Magnificent Seven high fliers such as Amazon, Nvidia or Tesla. Only the US has the deep capital markets required to fund their breakneck growth.
I invest in the US mega-caps myself, via the Vanguard S&P 500 UCITS ETF, the Legal & General Global Technology Index Trust and Scottish Mortgage Investment Trust.
FTSE 100 star performers
The rest of my portfolio is made up of direct FTSE 100 stock holdings, with a few smaller UK firms. They’ve done very nicely for me. I only populated my Self-Invested Personal Pension (SIPP) a couple of years ago, and five have already more than doubled. All are individual UK equities rather than funds: Just Group, Rolls-Royce Holdings, Costain Group, 3i Group and Lloyds Banking Group.
Rolls-Royce is the standout. Its shares are up a staggering 1,347% in the last five years, turning £10,000 into £144,700. Rolls is still doing nicely, up 99% in 12 months, although the pace is inevitably slowing.
Defence manufacturer Babcock International Group is second best, up 362% over five years, and 136% in the last year. NatWest Group rounds out the top three, up 331% over five years and 48% in the past 12 months. Marks & Spencer Group, Centrica, 3i Group and BAE Systems are all up around 300% over five years.
Happily, I hold Rolls-Royce, 3i and BAE. NatWest tempts me, but otherwise, Iâm cautious about these FTSE 100 stars. I prefer to pick struggling stocks instead, in the hopes that their fortunes reverse. Thatâs how I caught Rolls-Royce. Itâs not foolproof, I’ve ended up with the odd turkey like Diageo but overall, it’s worked for me.
Bunzl looks a bargain
One stock I recently bought is Bunzl (LSE: BNZL), a distribution and services group supplying consumable items to businesses worldwide. Its track record is impressive, with decades of dividend increases and rapid growth through acquisitions. Until recently.
Sales were hit by US tariffs and a shift to own-brand products, losing a major customer. The Bunzl share price has slumped 30% over the past year.
It looks great value as a result. Today, the price-to-earnings ratio sits at 12.6, with the trailing dividend creeping above 3%. Yesterday, the company confirmed third-quarter trading was in line with expectations, with group revenue rising 0.6% at constant exchange rates.
Sadly, I don’t think it’ll be the next Rolls-Royce. And I’ve learned the hard way that struggling companies can take a year or three to turnaround. But that’s fine. I invest with a longer time horizon than that. Which brings me to another reason investors underestimate FTSE 100 stocks.
All those performance figures I listed above? They exclude dividends. Today, FTSE 100 shares yield 3.25%, on average, around three times the US average of 1.1%. That doesn’t show up in the performance figures, but makes a huge difference over time. I expect Bunzl to give me the ideal combination of share price growth as it recovers, with a consistently rising income. No guarantees though.
FTSE 100 stocks can deliver real long-term wealth. And from time to time, a few fireworks too.
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Harvey Jones has positions in 3i Group Plc, BAE Systems, Bunzl Plc, Costain Group Plc, Diageo Plc, Lloyds Banking Group Plc, Nvidia, Rolls-Royce Plc, and Scottish Mortgage Investment Trust Plc. The Motley Fool UK has recommended Amazon, BAE Systems, Bunzl Plc, Diageo Plc, Lloyds Banking Group Plc, Nvidia, Rolls-Royce Plc, and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
