This FTSE 100 growth machine is showing positive signs for a 2026 recovery
Bunzl (LSE:BNZL) has been one of the worst-performing FTSE 100 stocks of 2025. But I think its latest trading update suggests things might be much more positive in 2026.
Iâve been buying the stock as itâs fallen 35% since the start of the year and itâs already a big part of my portfolio. So should I carry on or look to diversify with other opportunities?
Q4 trading
The stock market didnât like Bunzlâs Q4 trading update very much, sending the share price down 7%. That surprised me, but it recovered to finish the day down less than 2%.
When I looked at the report, I didnât see much to feel particularly strongly about one way or the other. The firm lowered its 2025 guidance in April and results are in line with this forecast.
The outlook for 2026 is mixed. Bunzl is expecting operating margins to contract slightly as tough macroeconomic conditions persist, but it does anticipate sales returning to growth.
For the time being, acquisitions are going to continue to be the main force driving revenue growth. And while that might put some investors off, I donât see it as a big concern.
Long-term investing
As a distributor of consumables, Bunzl is always likely to experience ups and downs as economic conditions change. But I think the long-term trajectory for the company is upwards.
Itâs fair to say the firmâs strategy of growing through acquisitions is a divisive one. And thereâs definitely a risk of overpaying for a business, which can be destructive to shareholder value.
My view, though, is that not all acquisitions are the same. Ones that are smaller and fit into a companyâs existing operations are less dangerous than ones that are larger and separate.
Bunzl has a good track record of the former type of acquisition and a fragmented industry means I expect this to be a source of long-term growth. So what should I do about it?
Portfolio building
My long-term investment thesis for Bunzl is still intact. The firmâs scale means it can supply products more quickly and reliably than its competitors, which is a clear benefit to customers.
The company is also set to return a lot of cash to investors. Itâs just completed a £200m share buyback and plans to use £700m next year for acquisitions or shareholder returns.
For me, the main issue is that (despite the recent declines) itâs already the second-largest stock in my ISA. And adding to it risks unbalancing my portfolio.
Thatâs something Iâll need to think carefully about when Iâm next in a position to buy shares at the start of January. But if the stock stays where it is, itâll be hard for me to resist.
Recovery signs
I think Bunzlâs forecast for revenues to get back to growth in 2026 is a very positive sign. Most of all, itâs a clear indication the company can move on from this yearâs operational issues.
Ongoing macroeconomic issues might well present a challenge in the year ahead. But Iâm inclined to see this as a short-term opportunity, rather than a long-term threat.
In my view, Bunzl is exactly the kind of stock investors should be looking seriously at in the New Year. And I think the FTSE 100 has more opportunities like this one.
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Stephen Wright has positions in Bunzl Plc. The Motley Fool UK has recommended Bunzl Plc. 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.
