The FTSE 100 has risen by about 12% in 2019. Add in a 4% dividend return, and investors owning a FTSE 100 index tracker should have seen a return of about 16% in this year. That’s a pretty good result — the long-term average annual return from the UK stock market is about 8%.
However, 16% looks pretty dull when you compare it to the index’s top performer JD Sports Fashion (LSE: JD), whose share price has risen by 130% over the last 12 months. That’s a staggering return from a relatively large business.
Here, I’m going to look at JD Sports and two other top performers from the FTSE 100. After a stellar year, should we be buying or selling these stocks?
A super retailer
You’re probably familiar with JD Sports’ main UK business, which sells trainers and branded sports and leisure wear. But you may not realise that nearly 60% of the group’s £5bn+ annual revenue now comes from overseas. Outside the UK, JD operates in Western Europe, the US and Asia.
This business has been a strong performer for a very long time. It’s been a much better investment than UK rival Sports Direct.
If you’d invested £1,000 in Sports Direct when it floated on the stock market in 2007, you’d have about £1,670 today. If you’d invested £1,000 in JD on the same day, your shares would be worth about £39,800 today.
JD shares aren’t cheap and the group’s growth rate has slowed over the last couple of years. But this is a class act, in my view. I’d continue to hold the shares and would view any weakness as a possible buying opportunity.
Industrial growth
The simplest way to describe Aveva Group (LSE: AVV) is probably as an industrial software firm. The company says it delivers systems that help improve processes, productivity and information sharing.
It’s a fast-growing area. Sales have risen from £209m in 2015 to £822m over the last 12 months. The shares have also performed strongly – the share price has risen by more than 90% in 2019.
More than 60% of the group’s revenue is recurring and the business is growing strongly. Underlying profit margins and cash generation are consistently strong, minimising the need for debt.
However, the shares look expensive to me, trading on 43 times 2019/20 forecast earnings. Although forecasts suggest a further 12% earnings growth in 2020/21, that still leaves the stock trading on an earnings multiple of 38. I think that’s high enough, so I’d rate the shares as a hold for now.
A big deal
The third best performer in the FTSE 100 is the London Stock Exchange Group (LSE: LSE). This financial powerhouse runs the London market and provides a range of essential transaction-handling services for stock market participants.
Alongside this, the group has a fast-growing data business that’s set to be boosted by the acquisition of financial data provide Refinitiv (formerly Thomson Reuters) next year.
The market has responded favourably to this deal and LSE shares look set to end the year with a gain of about 85%. This $27bn deal looks expensive to me but should provide a new high-margin business and reliable cash flow.
With profit margins of more than 30% and very strong cash generation, I’d like to own LSE shares. However, I feel they’re probably fully priced at the moment. I’m going to stay on the sidelines for now, but remain interested.
