The blue-chip FTSE 100 and mid-cap FTSE 250 are both up year to date. Here, I’ll look at what I’d have now if I’d invested £25k in the FTSE 350 index at the beginning of January.
What is it?
The index in question combines the largest 350 companies listed on the London Stock Exchange, specifically the constituents of the FTSE 100 and FTSE 250.
It offers a broad view of UK corporate performance, spanning diverse sectors like finance, healthcare, energy, and consumer goods. As such, it can be seen as a benchmark for the overall economic health of the UK.
How much?
Unfortunately, the UK economy hasn’t exactly been firing on all cylinders in recent times. Perhaps this is why the FTSE 350 has returned just 30.7% in the past five years, including dividends.
Things have picked up a bit lately though. As of 30 September, the year-to-date total return was approximately 10%. This means that I’d have around £27,500 in my account if I’d invested £25,000 in a tracker like the iShares 350 UK Equity Index Fund.
With inflation falling and more interest rate cuts on the horizon, consumers should have more money to spend. Therefore, I wouldn’t be surprised to see the index inch higher in the coming months.
Buying individual shares
I often look at the S&P 500 — up 200% in 10 years with dividends — and wonder if I should just buy a US tracker, an exchange-traded fund (ETF). It would save me a lot of time researching and following individual shares.
Then again, I’d totally miss out on stocks that can go up 10, 20, or even 50 times in value over time. Personally, I’d rather take on more risk for greater potential reward, at least at this stage.
However, when it comes to FTSE trackers, the meagre historical returns have never tempted me to invest. Instead, I’d rather buy individual UK shares that I think can beat the market.
A true FTSE heavyweight
One stock that I think can carry on outperforming is the FTSE 350’s largest constituent: AstraZeneca (LSE: AZN). Shares of the global pharma giant have returned an annualised 10.2% over the past five years, easily beating the FTSE 100’s 6.1%.
In the first half of 2024, the company’s revenue increased 18% year on year to $25.6bn, driven by double-digit growth across all four divisions. Oncology, its largest unit, grew by an impressive 22%.
One risk I do see here is the new US law requiring drugmakers to negotiate prices with the government’s Medicare health insurance programme (covering 66m people). This could impact future earnings.
Still, I think the stock is set up for further gains. AstraZeneca’s pipeline is massive and it’s aiming to launch 20 new medicines by 2030. It’s targeting $80bn in annual revenue by then, up from $45.8bn in 2023.
Plus, I think accelerating advances in artificial intelligence (AI) could revolutionise the industry. The firm is already “embracing the adoption of responsible AI solutions, from discovery to clinical trials, treatment delivery and beyond to bring the right medicines to the right patients, faster than ever before.”
Finally, AstraZeneca’s forward price-to-earnings multiple of 15.3 looks reasonable to me. I’d buy the stock to hold long term if I didn’t already own it.
