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2 FTSE 100 growth stocks I’d buy in 2019

While most investors might see the FTSE 100 as the place to go for steady dividends from stable companies and the FTSE 250 as being home to more growth stocks. Following that approach could miss out on some of the top index’s growth prospects.

Very big companies might be similar to elephants in the galloping stakes, but steady growth over the long term can still snag you some great rewards — and with lower risk than smaller firms. That’s how I see the two companies I’m looking at today.

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Drink up

First up is drinks giant Diageo (LSE: DGE), which at first glance you might think of as a mature dividend payer whose growth days are over. But I think you’d be wrong.

While Diageo’s best known brands in developed countries, like Johnnie WalkerSmirnoffGuinness and many others, might not be growth brands here, the company is expanding its offerings and sales across the developing world. At the halfway stage at 31 December, operating profit was up 29% in the Asia Pacific region, and up 28% in Africa.

That’s led to steadily rising earnings per share. If forecasts prove accurate, EPS will have grown by 44% between 2014 and 2020, which is a pretty good growth performance over just six years.

Diageo will surely go ex-growth and turn into a high-yield dividend payer some day. But it hasn’t happened yet — and with billions of the world’s population set for upwards mobility and the desire for upmarket brands, I can’t see it happening any time soon.

P/E valuations in the low 20s are relatively high, but I think they’re justified based on Diageo’s long-term potential. I’d buy. And one day I must get me a bottle of Rumple Minze.

Fund management

Having someone else manage my investments is anathema to me, and when I extricated some funds from a protected benefits pension scheme recently I almost felt like I was battling demonic forces.

But while I rebel at the idea of being managed, I have no objections to managing other people’s money. I don’t mean personally, but by buying shares in a fund management company like St James’s Place (LSE: STJ).

Profits can be erratic as investors often overreact to both up and down spells. And with cash inflows and outflows typically showing significant variation, it’s perhaps not an investment for those who can’t handle short-term volatility.

But looking at forecasts for St James’s Place, they suggest a rise in EPS between 2014 and 2020 of 69%. I think that’s also seriously impressive over a six-year time span.

Falling shares

In terms of valuation, since the start of 2018, St James’s Place shares have fallen back quite a bit, depressed by a weak fourth-quarter trading update. After a share price gain of only around 10% over the past five years, we’re now looking at a forward P/E multiple of 16 based on 2020 forecasts.

Dividends are predicted to yield around 5-6%, though lack of cover could be a worry in the short term. So are the shares good value now? My colleague Rupert Hargreaves thinks so, and for those with a decade-plus horizon, I do too.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo. 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.