Over the last five years, the FTSE 100 has jumped by 51.5%, excluding dividends. Adding in these cash rewards takes the index’s return close to 82%. That’s a compound annual growth rate of around 12.7% a year — well above the UK stock market’s long-term average.
Of course, some Footsie constituents performed better than others over this half-decade. Here are three FTSE 100 shares I wish I’d bought in January 2021.
A top trio
Of the index’s current companies, two haven’t been members for five years, leaving 98 shares. Of these 98, 33 stocks have fallen over the last 60 months. This leaves 65 shares whose prices have climbed since January 2021.
The #1 FTSE 100 winner over five years is famed engineering firm Rolls-Royce Holdings. Its shares have skyrocketed by 1,108.4% since those days of face masks and lockdowns. Back then, it was clear that Rolls-Royce stock might soar when Covid-19 was conquered. But somehow I failed to find the ‘Buy’ button and keep kicking myself for missing out on this multi-bagger. Still, some of this gain has been captured by my family portfolio’s FTSE 100 tracker funds, at least.
In second place is aerospace and defence firm Babcock International Group, whose shares have surged 594.8% over five years. The war in Ukraine and rising geopolitical stress has sent this stock skywards as Babcock’s order book swells. Alas, I also missed out on this big winner.
My bronze medal goes to telecoms provider Airtel Africa, whose share price has leapt 368.9% over five years. The company has ridden the growth wave of mobile and money-transfer services in African countries. Sadly, this is another go-go growth stock I failed to buy before its subsequent surge.
A value pick for five years?
When investors buy company shares, they buy the future and not the past. That’s why I’m always searching for hidden value in the FTSE 100. As a value/dividend investor, I seek established businesses whose share prices are in the doldrums, but set for recovery.
One candidate I keep seeing is alcoholic-drinks giant Diageo (LSE: DGE). Its shares have plunged 42.7% over the last five years. I had hoped for a recovery in 2025, but this comeback failed to arrive. Indeed, the share price has fallen 30.5% over 12 months.
My hope is that Diageo is a classic ‘fallen angel’ and becomes a profitable recovery play following a sustained period of weakness. Then again, it might equally turn out to be a value trap — easy to get into, but painful to exit.
As I write, the Diageo share price stands at 1,668p, valuing this FTSE 100 firm just short of £37bn. At its end-2021 peak, its market value neared £90bn. Thus, this business has destroyed tons of shareholder wealth lately.
The good news is the business has a new CEO. Sir Dave Lewis has a great track record of turning around ailing corporate Goliaths. Hence, in Diageo’s next set of results (due on 25 February), I expect Sir Dave to announce radical plans to revive this great British brand.
Meanwhile, Diageo shares offer a generous dividend yield of nearly 4.8% a year. As my family portfolio already owns this FTSE 100 stock, we will continue to collect this income while sitting back and awaiting operational and financial improvements!
