Last Boxing Day, I showed my 12-year-old nephew a list of FTSE 100 stocks and asked him to pick the one that he thought would perform the best in 2025.
After giving the matter a lot of thought, he came up with Coca-Cola HBC (LSE:CCH). His reasons? Well, nearly all of his friends like Coke, the drink’s available in every supermarket and the company must have loads of money because it’s always advertising on TV. At the time, I thought this sounded pretty sensible.
My selection? I went for RELX (LSE:REL). Admittedly, the global provider of information-based analytics for professionals and commercial customers isn’t as famous as Coca-Cola. But I thought it would be one of the beneficiaries from the increased adoption of artificial intelligence (AI) solutions.
Although there’s still over a month before the competition’s officially over, I’m going to admit defeat now. Since Christmas 2024, Coca-Cola has seen its share price rise by 30%. By contrast, the value of RELX’s stock has fallen 16%.
Cheers!
Well done, Oscar! I owe you £20. But even though my ego’s taken a bit of a bruising, I reckon RELX should do better in 2026.
Having said that, I think Coca-Cola’s also worth considering. The UK-listed stock has the rights to sell the world’s most popular drink in 29 European and African countries.
In particular, I like the group’s 24/7 strategy – “we have a product for every occasion around the clock” — and the fact that the group’s currently trading at a historically low multiple.
Analysts are forecasting earnings per share of €2.63 (£2.32 at current exchange rates) in 2025. This implies a price-to-earnings ratio of 15. Looking ahead to 2029, this drops to just 10.
But there are risks. With a yield of 2.6%, its dividend is below the FTSE 100 average. And despite having some defensive characteristics, it’s not immune from a slowing global economy.
However, the group’s not just about Coke. It has plenty of other recognisable brands in its stable. And it’s recently announced a $2.6bn deal to acquire a majority stake in a rival African bottling company. This will give the group access to another 14 countries on the continent with the world’s fastest-growing population.
Second time lucky?
As for RELX, it recently reported an “improving long-term growth trajectory” driven by increased investment in the development of AI-powered decision tools. It also said that its new end-to-end researcher solution had received “positive feedback”.
The consensus of analysts is for a 12-month share price target that’s 42% higher than its current (20 November) share price.
Like most subscription-based businesses it generates an impressive gross profit margin. This helps support a valuation multiple of around 24 times forecast 2025 earnings. Not cheap. But much lower than its five-year average.
For 2027, its price-to-earnings ratio drops to 20.
But the stock’s yield is less than Coca-Cola’s and there’s a risk that AI could actually damage the business rather than help it. The technology could help others develop rival tools relatively quickly.
However, on balance, I think it’s going to be a net beneficiary from AI. That’s why I reckon it’s worth considering.
