Forget the Cash ISA! I’d buy these 2 unsung heroes that have been smashing the FTSE 100

Harvey Jones picks out two FTSE 100 (INDEXFTSE:UKX) that have been overlooked, despite thrashing the index.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Cash ISA best buy tables make dismal reading. You can barely get 1.5% a year on instant access, and a little over 2% if you lock your money away for up to five years. It’s a lousy return compared to the average long-term historical growth of 7% a year on the FTSE 100.

These two FTSE 100 companies have outperformed the index lately, roughly doubling your money over the past five years. The strange thing is, you may not have heard of either of them, even though they are the 15th and 17th biggest companies in the UK, by market capitalisation. Here’s why you might consider buying them inside a Stocks and Shares ISA today.

RELX

I worry that many private investors overlook business-to-business operations like RELX (LSE: REL), because the name is so unfamiliar. Yet this is a massive operation, with a market close to £36bn, making it bigger than National Grid, Barclays, Tesco and many other better-known names.

Formerly Reed Elsevier, it is a global provider of information-based analytics and decision tools for professional customers, that does everything from help scientists make new discoveries to preventing online fraud and money-laundering.

The share price has been on a tear lately, rising 83% over five years, and 20% over the last 12 months. Its latest update reported steady 4% growth in underlying revenue, while it has completed £550m of a planned £600m share buyback.

The forecast yield of 2.5% is lower than the FTSE 100 average of 4.5%, but management has been highly progressive, raising its payout by 75% over the last five years. RELX stock is relatively expensive, trading at 20 times forecast earnings, but with those earnings forecast to grow 28% this year and 8% next, the momentum could continue.

Compass Group

Here’s another behind-the-scenes behemoth that is surprisingly large, with a market cap of nearly £32bn. Compass Group (LSE: CPG) specialises in food, hospitality and support services and it’s a massive operation, employing 550,000 people across 50 different countries.

It’s also a runaway success, investment wise, with the share price up a whopping 106% over five years, against less than 10% for the index as a whole, and 33% in the last 12 months. That’s fine if you like hot momentum stocks, not so good if you like bargains, with the Compass Group share price now trading at 24 times forward earnings.

On the plus, those earnings are expected to rise 9% this year and 8% next, driven by a particularly strong performance in North America. Management continues to generate growth through acquisitions, and this stock could give you some protection against tougher economic times.

Again, the dividend is relatively low, with a forecast 2% yield, covered 2.1 times, but the pace of growth is rather more impressive. In 2015, the dividend stood at 29.4p. By 2020, analysts are predicting 43.69p, a rise of almost 50% over six years.

You can find far cheaper stocks on the FTSE 100, and stocks with more dazzling dividends, but few more consistent performers. So again, it may be worth paying a premium price. I’d pick them over any Cash ISA I can see right now.

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.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, Compass Group, RELX, and Tesco. 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.

More on Investing Articles

Investing Articles

How many National Grid shares must I buy for a £100 monthly second income?

I think National Grid could be one of the safest options for investors seeking a dividend income. And today its…

Read more »

Blue NIO sports car in Oslo showroom
Investing Articles

NIO stock is down 90%. Will it recover?

NIO stock has fallen significantly from its 2021 all-time high. But could now be a chance for this Fool to…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

These 2 UK shares could help me reach £1,000,000 in my Stocks and Shares ISA

A FTSE 100 compounding machine and a FTSE 250 value stock are the UK shares Stephen Wright thinks could help…

Read more »

Middle-aged Caucasian woman deep in thought while looking out of the window
Investing Articles

If I’d invested £1,000 in Lloyds shares at the start of the year, here’s what I’d have now

The stock market is unmoved, but Stephen Wright thinks last year’s record profits might give Lloyds shares a long-term boost.

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

I’ll snap up shares in this growth stock in March if others don’t get there first

This Fool says shares in this growth stock are stable, full of profit, and might be undervalued. But there are…

Read more »

Rainbow foil balloon of the number two on pink background
Investing Articles

My 2 top energy investment trust picks for a passive income

I'm aiming to buy more of these investment trusts for a passive income and the reasonably stable energy sector returns…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

5.5% dividend yield! Shares like these could be great for my retirement

Oliver Rodzianko thinks this company with a stellar dividend yield could be very useful when looking for income from his…

Read more »

Investing Articles

Should I buy this FTSE 250 stock as it soars back to the FTSE 100?

This FTSE 250 stock has rallied following its pandemic woes. This Fool thinks now could be a good time to…

Read more »