I’m looking to add some FTSE 100 growth stocks to my portfolio, to counterbalance the dividend-paying companies I’ve been targeting lately. I’d buy these three into a Stocks and Shares ISA in a shot.
In these tech-y times, data is a hugely valuable commodity. As the biggest credit bureau in the world and Experian (LSE:EXPN) has a whole heap of it.
Star fund manager Nick Train at the Finsbury Growth & Income Trust is a fan, saying we are fortunate Experian chose the UK for its primary listing when it floated in 2006. He reckons it has “almost more opportunities to create new services from that data than it can deal with”. That tickled me.
The whole world to aim at
Since 2006, Experian has delivered an average of 6% organic revenue growth a year, with a 98% cash flow conversion. Its share price is up 66.82% over five years, but a relatively modest 7.46% over 12 months. My major concern is that it’s expensive, trading at 29.92 times earnings. I’ve got used to buying FTSE 100 financials trading at around six times earnings. The yield is just 1.35% but, as I said, I’m after growth here.
Net debt of £3.89bn in 2023 doesn’t worry me, given revenues of $6.5bn and benchmark profit before tax of $1.67bn. Earnings per share have posed solid growth. Given its toppy valuation, I may wait for a dip to buy it. But will I get one? Probably not. I’ll buy it anyway.
I find it hard to believe I’ve never bought defence manufacturer BAE Systems (LSE: BA). The only reason I can think is that I’ve never seen a bad time to buy it, which means I’ve never found a particularly brilliant time to do so.
In a warlike world, BAE’s products are in more demand than ever. So are its shares. They’re up 39.2% over one year and 135% over five years. They’re not even that expensive, trading at 21.1 times earnings. Plus they yield a reasonable 2.31%.
I tend to favour down-on-their-luck stocks (Ocado Group tempts me on that score today) rather than perpetual winners. However, I can’t afford to ignore BAE’s success any longer. It’s time I got stuck in and bought it.
I’d love to own all three FTSE 100 shares
My final growth stock pick is accountancy software specialist Sage Group (LSE: SGE). It’s smashed the FTSE 100 over the last year, rising 52.95%. Over five years, it’s up 84.32%.
A major reason for its recent spurt is its AI-enhanced Digital Assistant tie-up with Microsoft, which will help small business customers run their operations more effectively.
Sage is another Train favourite. He says the cost transitioning its services to the cloud has weighed on growth, but is now paying off by boosting profits.
Sage is even more expensive than Experian and BAE, trading at 35.72 times earnings. That doesn’t leave much room for slip-ups, not that I expect any.
I’m finding it a little tough moving out of my comfort zone of dirt cheap dividend stocks. Yet if I wait for Sage to get cheap, I could miss out on an awful lot of growth. I’ll add all three for my Stocks and Shares ISA as soon as I have the cash.
