I’ve been poring over the FTSE 100 past performance tables and two stocks jumped right out at me. They’re a vision in blue (rather than red) as their share prices have climbed over five years, three years, one year, six months, three months, one month, and one week. Only a handful of companies on the index can boast that.
| One week | One month | Three months | Six months | One year | Two years | Three years | Five years | |
| BAE Systems | 4.90% | 14.60% | 4.68% | 21.92% | 28.69% | 80.54% | 102.44% | 64.80% |
| RELX | 0.66% | 4.81% | 3.89% | 7.33% | 7.37% | 21.22% | 52.26% | 52.22% |
As a rule, I prefer to buy out-of-favour stocks, in the hope of picking up a bargain. However, the strong and steady growth these two shares have delivered is hard to ignore. Should I buy them?
System addict
The first stock is aerospace and defence contractor BAE Systems (LSE: BA). The full performance figures are in the table above but over the last year it has climbed 28.69%, against growth of just 0.82% on the FTSE 100 as a whole.
Defence stocks are in demand these days, as the war in Ukraine rumbles on and US-China tensions intensify, boosting demand for its Typhoon jets, Dreadnought submarines, and other weaponry.
Last week, BAE reported 11% growth in half-year sales to £12bn and free cash flow of £1bn, up from £123m. It now boasts a record £66.2bn order book, following a staggering £21.1bn of new orders.
In a world of geopolitical risk, BAE systems looks like one of the safest investments around, with UK, US, and European buyers all increasing their defence budgets. The long-term nature of defence contracts makes that order book even more attractive.
Strong and steady
The risks? I suppose peace could break out, though I’d welcome that risk. As government debt rises everywhere, defence budgets could come under pressure. BAE Systems may have been overbought, although trading at 18.45 times earnings it isn’t that expensive.
The 2.65% yield could be higher, I suppose, although it is forecast to hit 2.9%, covered 2.1 times by earnings. I could wait for a share price dip but, as I’ve shown, that could take time.
Information and analytics firm RELX (LSE: RLX) is another steady grower although its 12-month return of 7.37% is a little less dramatic. Yet the firm is maintaining strong momentum with half-year pre-tax profits up 12% to £1.4bn and 8% revenue growth to £4.5bn.
Again, the RELX dividend is lower than the FTSE 100 average at 2.2%, but management is progressive, having just hiked the interim payout by 8%.
Here’s what I’d buy
Artificial intelligence was originally seen as a threat to RELX as customers could get the company’s services cheaper elsewhere. CEO Erik Engstrom has since soothed nerves noting that its analytics and decision tools have used AI for more than a decade. By focusing on service and innovation, it should stay one step ahead but it’s something to consider.
In contrast to BAE, RELX shares look pricey trading at 25.4 times earnings. To be fair, that’s par for the course for this successful company. I only have the funds to buy one of them today and I’ll opt for BAE. Its huge order backlog gives me all the security I need.
