Not all FTSE 100 stocks are created equal. While some have generated fantastic returns for investors over the long run, others have been poor long-term investments.
Here, I’m going to highlight three Footsie ‘super stocks’. These are shares that have continually generated wealth for investors over the years.
Given their track records, I think investors can’t afford to ignore these names and some research is in order.
Strong returns
First up is Sage (LSE: SGE). It’s a software company that specialises in cloud-based accounting and payroll solutions.
Long term, this stock has smashed the FTSE 100. In the last 10 years, it has risen about 180% (so I could have nearly tripled my money). By contrast, the Footsie is only up about 15% in that time.
Why has it done so well?
It operates in a growth industry, for a start. Today, there’s high demand for accounting software solutions that can help businesses automate processes and cut costs.
It’s also very profitable. And highly profitable businesses tend to be good long-term investments because they can compound their profits at a high rate and get much bigger over time.
Can Sage keep delivering for investors from here?
I think so.
I’m not expecting explosive future returns as the company’s valuation is quite high (which adds some risk).
But with revenue growing in high single digits, and the company offering a 2% dividend yield, I can see the stock delivering solid returns in the years ahead.
It’s worth noting that analysts at Peel Hunt just raised their target price to 1,187p – about 22% above today’s price.
Powerful brands
Next up is InterContinental Hotels Group (LSE: IHG). The hotel company owns a range of well-known brands including InterContinental, Holiday Inn, and Regent.
Like Sage, this stock has outperformed the FTSE 100 by a wide margin in the long term. Over the last decade, it has risen about 210%.
I put this down to the power of the company’s brands, its asset-light model (it franchises its brands), and a high level of profitability.
Looking ahead, I think the stock has the potential to keep rising. The travel industry is booming as consumers look to make up for trips lost during Covid.
And in the long run, the company should benefit from the retirement of the Baby Boomers, who love to travel.
Of course, a major downturn in consumer spending is a risk here.
I think the overall risk/reward setup is attractive, however.
Set for a big 2024?
Finally, we have Ashtead (LSE: AHT). It’s a construction equipment rental company that operates in the US, the UK, and Canada.
This stock has been a phenomenal investment over 10 years, rising about 750% (although it’s been volatile at times). There are few others on the London Stock Exchange that have produced such returns.
This performance can be attributed to factors including high levels of profitability and a successful acquisition strategy.
Is Ashtead worth buying today?
I’m my view, yes.
I think 2024 is likely to be a big year for it due to ‘mega projects’ in the US.
And with the stock currently trading at a reasonable earnings multiple (about 16), I think there’s plenty of room for share price appreciation from here although it could continue to be volatile.
