£1,000 to invest? I’d buy this FTSE 100 thrashing growth hero inside an ISA

Harvey Jones says these two FTSE 100 (INDEXFTSE:UKX) growth stocks merit their place in a well-rounded ISA portfolio.

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If you’re looking to top up your Stocks and Shares ISA, there are plenty of FTSE 100 companies offering high yields at a bargain price. Tread carefully, though, because many may have seen their share price fall due to poor performance.

That’s not a problem with these two stock picks, both of which have posted barnstorming share price growth over the last five years. Especially my first pick.

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Melrose Industries

Melrose Industries (LSE: MRO) is one of those unglamorous blue-chips that private investors can easily overlook, to their cost. It has grown into a company worth £10.83bn by purchasing underperforming manufacturing businesses, then working hard to turn things round. It’s probably best know for its recent takeover of GKN.

Melrose aims to revive its acquisitions and sell them at a profit, then return the proceeds to shareholders. It only floated on AIM in 2003, but since then has posted an average shareholder return of 25% a year, and created £4.8bn of shareholder value.

The share price is up an astonishing 352% over the last five years, against a rise of around 14% across the FTSE 100 as a whole. Despite this, it trades at a relatively modest 16.7 times forward earnings, roughly similar to the valuation for the index as a whole.

This is a growth stock rather than an income play, although it does yield 2.2% a year, covered 2.7 times. You also have to brace yourself for lumpy profits, which can bounce around depending on the timing of acquisition and sales.

That makes it very difficult to look at one set of company results and gauge the underlying trend. However, Melrose now has 16 years of storming success under its belt, which is an impressive track record for any company.

Informa

Exhibitions, events and business publishing group Informa (LSE: INF) can’t match that level of share price growth, but it’s nonetheless up 77% over five years, way ahead of the index. It has nudged higher today after reporting continued growth in revenue, adjusted profit, earnings and cashflow, with full-year group revenue on track to hit 3.5%.

Underlying revenues grew 2.8% in the 10 months to 31 October, and that’s ahead of its key November-December trading period, which is seasonally stronger. Informa has been enlarged by its recent tie-up with UBM, and is now a £10bn company with a global reach in the knowledge and information economy, including professional, commercial and academic.

Recent growth came despite two “impacts”, in Dubai and also Hong Kong, where civil protests have slightly dented revenues. Informa also issued a new €500m bond to strengthen its balance sheet and lower the overall cost of debt and extending average maturity to 5.5 years. Its debt recently doubled to £2.68bn, roughly a quarter of its market-cap, but is not a major concern.

Informa currently trades at 15.9 times forecast earnings, which means it’s fractionally cheaper than the FTSE 100 as a whole, despite its dramatically superior share price performance. The forecast yield is 2.9%, covered 2.2 times, so this one is also primarily a growth play.

Things look solid if not spectacular on that front, with earnings expected to climb 3% this year and 5% next. A solid company for challenging times.

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Harvey Jones has no position in any of the shares 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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