Up 189% so is now the perfect time to sell my favourite FTSE 100 stock?

Harvey Jones loves private equity trust 3i Group, which has been his favourite FTSE 100 stock for years. But he has one oversized worry.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Global private equity and infrastructure investment manager 3i Group (LSE: IIII) is the most successful FTSE 100 stock in my self-invested personal pension (SIPP).

It’s one of the first shares I bought after taking charge of three legacy company pensions last summer. I invested £2k in August, October and November. Today my stake is worth almost £10k, including reinvested dividends. Over 12 months, the 3i Group share price is up almost 65%. 

Should you invest £1,000 in Aviva right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Aviva made the list?

See the 6 stocks

Created with Highcharts 11.4.33i Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

This isn’t a flash in the pan. It’s up 193% over five years. Only Frasers Group (269%) and Diploma (197%) have done better. I’m thrilled but now I’m wondering whether to take the money and run. Or rather, reinvest it.

3i Group is a winner but…

I see myself as a long-term buy-and-hold investor. Selling goes against the grain. It makes even less sense when I consider 3i Group’s stellar track record, which dates back to 1945. It floated in 1994 and now manages assets worth more than £22bn.

3i is an investment trust and a rarity, in that it trades at a premium to its the underlying net value of the assets it holds. After the volatility of recent years, many trusts trade at a 30% discount or more, but it’s at a whopping 43.96% premium.

That’s a sign of success, obviously. In 2024, net asset value per share rose almost 20% to 2,085p, despite a 33p per share foreign exchange loss.

Its private equity business delivered a 25% gross investment return of £4.059bn, albeit down on the previous year’s 40% increase. Now here’s my concern. That return was mostly driven by the performance of its biggest holding by far, Dutch discount retailer Action Group.

3i took a 45% equity stake in 2011 for a mere £134m. Today, Action is Europe’s fastest-growing non-food discount retailer with more than 2,300 stores and €8bn of annual revenues. 2024 was another very strong year as 3i pocketed value growth of £3.61bn, dividends of £375m and a further £762m via a pro-rata share redemption.

Sell my winner

Action’s storming success offset softer performance from other portfolio holdings, which are “working through adverse phases of their market cycles”. 3i’s infrastructure business also floundered. It looks like a one-trick pony.

It doesn’t want to let go of Action. In fact, it increased its equity stake from 54.8% to 57.6% in the latest first quarter. And why not? Q1 earnings rose another 23% to €843m, although 9% sales growth was down from 22% year on year. It’s still rolling out stores but inevitably at a slower pace.

Action is now 72% of 3i’s entire private equity portfolio. I’m making an expensive play on a single European discount retailer whose growth will inevitably slow.

Also, where’s the exit strategy? Private equity companies have struggled to find buyers amid economic uncertainty and higher interest rates. 3i has done a brilliant job with Action. That may continue for a while but the ceiling is looming. I’m planning to sell half my stake before it hits it. I can’t bear to let go of all of it, though. I owe it some loyalty.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has positions in 3i Group Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

Here’s the dividend forecast for Rolls-Royce shares as Trump rocks the markets

Rolls-Royce shares have joined in the volatility over the past week. However, with the direction being largely downwards, the dividend…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Dividend yields of up to 11%! Here are 3 UK passive income stocks to consider

Searching for ways to supercharge your passive income with UK dividend stocks? Here are three that have grabbed our writer's…

Read more »

Young Caucasian woman at the street withdrawing money at the ATM
Investing Articles

£10,000 invested in NatWest shares at the start of 2025 is now worth…

NatWest shares surged into 2025, but things have become a little more complicated in recent weeks. Dr James Fox explores.

Read more »

Investing For Beginners

Why the FTSE 250 could outperform the FTSE 100 for the rest of the year

Jon Smith explains why the FTSE 250 could do better than its big brother when factoring in domestic exposure and…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Tariff fears send the Lloyds share price tumbling, but the dividend yield is climbing

Just when the Lloyds Banking Group share price had been rising steadily, along comes a global upheaval to knock it…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

Here’s how a stock market crash could help an investor retire years early

A stock market crash can be alarming -- but for the well-prepared investor, it can also be an exceptional opportunity…

Read more »

Investing Articles

1 key fact to remember in this stock market correction

This writer takes a look at a FTSE 100 investment trust that is catching his eye after the recent massive…

Read more »

Investing Articles

I was wrong about the Tesla stock price!

Tesla stock's been affected more than most by ‘Liberation Day’. But our writer has other concerns about Elon Musk’s company.

Read more »