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32%+ returns in 6 months! 2 FTSE 100 shares I’d buy today

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Chart showing an upwards trend, possibly in the FTSE 100
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The FTSE 100 index is on a steady run, up by 3.8% in the last six months. In the same period, Ashtead Group (LSE: AHT) and Spirax-Sarco Engineering (LSE: SPX) are up 32% and 39% respectively. These two are among the top-ten performing stocks in the index since April and look like good long-term investments for my portfolio. Here’s why.

Full steam ahead

Spirax-Sarco is an engineering firm that provides electric thermal solutions, pumps, and fluid path technologies. The company is an industry leader and has a strong history underlying revenue growth of around 7% over the last decade.

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Its recovery from the effects of the pandemic is evident when I look at its financial performance. Results for the first half (H1) of 2021 have improved compared to the corresponding period in 2020. The company recorded organic revenue growth of 17% and profit growth of 42%. Investors have reacted positively and shares are up 7.5% since H1 results were posted on 11 August.

Its share price is up 40.8% in the last year. Also, the company’s dividend yield of 0.7% has increased at a compound annual growth rate of 11% in the past 10 years.  

The company also plays a significant role in developing products for the ESG sector. The thermal energy division of the engineering firm is working on reducing carbon emissions from steam systems. Also, I see its growing partnerships with the medical devices sector as a big plus as we are in the midst of a pharma boom.

There are lingering concerns with Spirax-Sarco’s valuation at the moment. The stock is trading at a forward profit-to-earnings (P/E) ratio of 59. In the event of a market crash, investors could take profits and move to more dividend-heavy investments. I am tempted to wait for a correction before entering at sub-16,000p levels. But the FTSE 100 stock remains high on my watchlist for its steady growth and history of strong performances.

Let’s build

Ashtead Group operates one of the largest equipment rental companies in the UK and the US. Its business model involves buying a broad range of construction equipment and renting it on a short-term basis. Although it is not the most exciting company on my shortlist, returns have been immense.

Its shares have blown past pre-pandemic highs of 2,740p and are currently trading at 6,320p at the time of writing this article earlier today. In the last 12 months, shares have gone up 99% and five-year returns stand at a whopping 358%.

The company posted strong first-quarter (Q1) 2021 results. Compared to the same period in 2020, group revenue went up 21% in Q1 2021 with operating profit up 53% to $477m (Q1 2020: $311m).

With construction efforts restarting in the UK, Ashtead stands to benefit. The company also offers crowd management and perimeter solutions, an area with increased activity now. Analysts expect a 30% increase in earnings this year which I think will translate well to investor returns.

But the global economy has come under some stress in recent weeks with inflation fears and the re-emergence of Covid in parts of the world. Prolonged economic instability could affect construction projects and live events, which would be a major concern for the FTSE 100 company.

But I still think Ashtead is a good investment for my portfolio right now as it has an excellent track record and could see a surge in sales over the next few years.

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Suraj Radhakrishnan 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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