Forget the BT share price. This stock has smashed the FTSE 100

This FTSE 100 (INDEXFTSE:UKX) company has left BT Group – Class A Common Stock (LON:BT.A) trailing in the dust.

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Over the past 12 months, the BT (LSE: BT-A) share price has struggled to match the FTSE 100’s performance. Indeed, since the beginning of April 2018, the stock has lost 0.1%, compared to a gain of 5.2% for the FTSE 100 over the same time frame.

Including dividends, BT’s performance is a little better, but it still lags the FTSE 100. Including dividends over the past 12 months, the main index has returned 9.4% for investors and BT has added 5.1%.

I don’t think the company’s performance is going to improve anytime soon. So I believe investors might do better by selling the BT share price and reinvest their funds in the London Stock Exchange (LSE: LSE).

Growth champion 

Compared to BT, over the past five years, shares in the LSE have charged ahead and not looked back. Since the beginning of April 2014, the stock is up a staggering 189%, excluding dividends, compared to a gain of just 12.6% for the FTSE 100.

Over the same time frame, shares in BT have returned -37%. Including dividends, LSE shares have outperformed those of BT by 27% per annum since 2014.

And it looks to me as if this trend is set to continue as, while BT is struggling to grow in an increasingly competitive market, the LSE continues to innovate and expand its market share of the global financial services industry.

Underinvesting 

I think it’s fair to say BT has made numerous mistakes over the past decade. The company has underinvested in its network and spent tens of billions of pounds trying to enter the Pay-TV market and acquiring mobile operator EE. 

I think BT’s money would have been better spent reducing debt and investing in its existing operations, rather than trying to chase growth in markets where it had little experience. 

And now, because the group has been skimping on investments for years, smaller peers are now nipping at its heels. Businesses are springing up all over the UK intending to take market share from the telecoms giant, particularly in the broadband market. BT’s lack of investment has left many customers struggling with decades-old copper cables, which are struggling to handle rising volumes of data. 

BT is having to fight back. But with pension obligations and debts totalling around £20bn, the company is struggling to compete.

A global leader

On the other hand, the LSE hasn’t tried to dominate any markets where it lacks experience and has instead focused all of its efforts on expanding its capital markets businesses

These efforts mean that while BT has struggled to grow (the company’s earnings per share where they were in 2013) the LSE’s net profit has increased 160% over the past six years and earnings per share are up 200%. And while analysts are not expecting much from BT in the way of growth over the next two years, the City is forecasting a jump of 30% in the LSE’s earnings by 2020.

Overall, considering the company’s bright outlook and a track record of growth, I believe the LSE is a much better buy than struggling BT.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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