Within the UK’s FTSE All-Share index, there’s likely to be a new generation of businesses that will grow and cause their share prices to increase many times over.
Well-known and successful fund manager Nick Train, as well as others, have pointed to research indicating the UK market’s outperformance when it comes to nurturing multi-bagging stocks.
Outperformers hiding in plain sight
In one recent study conducted by analysts at Schroders, researchers found 59 UK-quoted companies that have achieved 30-bagger status over recent years. And that works out at about 5.4% of companies in the UK stock market, compared to about 4.2% in the US.
Who’d have thought it? Some of the most lucrative potential stock investments in the world are likely hiding in plain sight here on the UK stock market. And many of those names probably reside in the FTSE All-Share index right now.
As a quick reminder, the index is a capitalisation-weighted one made up of about 600 companies traded on the London Stock Exchange. And it’s a combination of the FTSE 100, the FTSE 250 and the FTSE SmallCap.
Therefore, businesses can grow within the All-Share from small-cap status, through mid-cap ultimately to become large-cap companies. And in so doing, it’s possible for them to deliver multi-bagging returns to their shareholders along the way.
Many funds and investment trusts use the FTSE All-Share as the benchmark for measuring their performance. And part of my own long-term investment strategy involves investing regularly in low-cost tracker funds that aim to mimic the performance of the FTSE All-Share.
The strategy is my way of aiming to at least match the returns of the UK stock market in my own portfolio.
Shooting for higher returns
But I’m also shooting for higher returns by picking the shares of individual companies within the FTSE All-Share. My aim is to uncover some of those hidden gems that have the potential to deliver multi-bagging returns for me in the years ahead.
And as the research shows, I’m stalking in a well-stocked hunting ground here. That said, there’s no guarantee or certainty that any investor will end up picking those winning stocks. And it’s even possible to invest in companies within the index that go on to lose money rather than make it.
But those risks are no reason for me to avoid trying. And I believe the index has within its constituents the potential to create some of the ISA millionaires of the future.
Schroders found that many of the 30-baggers came from ‘boring’ so-called old economy industries. Sectors such as housebuilding, flooring, industrials, mining, distribution, defence and wealth management.
So it doesn’t matter that the London market is short on the kind of tech stocks that do well for investors across the pond in America.
Meanwhile, the markets have been depressed lately and valuations are on the floor. That suggests rising valuations ahead may contribute to strong share-price progress for companies in the coming years, although such positive outcomes are not certain.
Nevertheless, I struggle to remember a set of conditions with greater positive potential than those surrounding the FTSE All-Share index now.
