Looking at the past performance of FTSE 100 stocks can be advantageous. If a company has seen strong share price growth over a year, it’s clear that it’s doing something right. Momentum is also clearly with the stock, meaning that it could push higher still in the future. I do need to be careful about reading too much into the past. After all, past performance doesn’t guarantee future returns! But by acknowledging the strong performance to some degree, here are two stocks that I’d consider buying now.
A FTSE 100 stock unlike many others
The first company that has seen strong share price growth is Scottish Mortgage Investment Trust (LSE:SMT). Over the past year, the FTSE 100 stock has seen a share price growth of 55%. During the 2020 calendar year, the share price actually doubled. It was one of the stocks that I noted as a top performer during the tricky year.
One element that allowed it to perform so well is that it isn’t a traditional business. SMT is an investment fund, meaning that it invests in a mix of stocks from around the world. If I buy shares in SMT, I’m essentially buying into all of the stocks that the fund owns. This worked very well last year, as the fund owned stocks such as Amazon, Tesla, Tencent, and Moderna.
SMT also is relatively concentrated in the stocks that it owns. It has 42% of overall holdings in the top 10 stocks. For me, this is both the reward and the risk of owning this FTSE 100 stock. It’s a risk because if two or three big names see a crash, it will have a disproportionately high negative impact on the SMT share price. However, SMT is a professional investment fund. The ability of the managers to outperform the market has been proven, so if this continues then it bodes well for me.
Building for the future
In my opinion, the main reason for the move higher has been the strong growth in house prices. As Taylor Wimpey is one of the largest UK homebuilders, this logically helps revenue to grow. Higher demand for housing creates more completions for the company, at a higher average selling price.
The outlook looks like demand could still be strong. The forward order book comprises 10,995 homes and is worth £2.8bn, as reported in a trading update in the spring.
The ending of the stamp duty holiday is one risk I see for the company going forward. This could stunt growth, particularly in the key first-time buyers space. The full impact of this is uncertain, but clearly a negative.
Overall, I think both FTSE 100 stocks offer me the potential for further growth. With the strong historical share price return, it gives me confidence looking forward. As a result, I’m considering investing in both companies.
jonathansmith1 has no position in any share mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon and Tesla. The Motley Fool UK has recommended Moderna Inc. and has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. 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.