Even though I’m keen on smart risk management, I still want to try and maximise my investment returns. This means that if I spot a stock I think could double in price within a reasonable period, I want to snap it up. Even if it’s a slightly risky option, the potential reward could be very high. Here are two FTSE 100 examples on my watchlist.
Coming back from a wobble
First up is St. James’s Place (LSE:STJ). The wealth management firm has seen the share price fall 50% over the past year.
It has endured a tough time of late. New regulatory rules mean it’s having to change the way it charges the fee structure to clients, making it more transparent. It also had to deal with sharp moves in financial markets last year, particularly with bonds. Finally, competition in this sector has risen, as more banks try to make a push into wealth management.
Despite all of this, I’m optimistic going forward. The firm has an experienced new CEO I think can guide the firm forward.
The stiffer competition shows this is an area of growth, which is actually a good thing. The firm already has a strong client base, with the half-year results showing it attracted £8bn worth of new client investments.
With my expectation of UK rate cuts later this year, I think more people will turn to investments to try and generate a higher return on cash. This should further help revenue for the business going forward.
In terms of the reasoning for the share price jumping, it’s quite simple. If the business can exhibit a strategic turnaround and investor sentiment improves, I don’t see any reason why the share price can’t be at the level it was a year ago. If this happened, the share price would see a 100% move higher from the current price.
The turnaround continues
On other other hand, I’m watching a company that’s soaring right now. I’m referring to Marks & Spencer (LSE:MKS). The stock is up 78% over the past year.
I wrote about the reasons why the stock doubled in price in 2023 earlier this month. In short, it benefitted from easing inflation, cost-cutting and focusing store openings in growth areas. Getting promoted to the FTSE 100 also helped the share price, with more exposure to new investors.
The CEO did issue caution, saying that “expectations for economic growth remain uncertain, with consumer and geopolitical risks”.
I believe the stock can continue to rally hard this year. One factor this is based on is financial results. The half-year results released in November showed that with revenue increasing 14.7% year-on-year, the operating profit jumped 129.7%, thanks to the operating margin rising from 2.2% to 4.3%.
Given the continued push on efficiencies this year, I think we could seen the operating margin increase above 7%. If this is the case, along with a similar jump in revenue, then operating profit would double again.
Using this as an example, I think the share price could surge if everything filters down to a big jump in net profit.
