Brand new research from financial data firm Refinitiv makes for compelling reading, particularly if you’re an investor with the vast majority of your wealth invested in UK-focused shares.
According to its analysts, the FTSE 250 — the second tier of companies listed on the London Stock Exchange — was one of the leading global indexes over the last decade. Not only was its 12% annualised return comparable with that of US equities (the S&P 500 returned the most with 13.6%), it also significantly outperformed the more internationally-focused FTSE 100 (7.4%).
As good as these numbers are, however, they pale in comparison to what investors could have achieved had they had the skill or good fortune to buy and hold the best performing UK-listed companies.
Let’s take a closer look at the three biggest winners since 2010.
On the podium
In third place is online property portal Rightmove (LSE: RMV). Thanks to its virtual monopoly in the UK, the company achieved a compound annual growth rate of 30.52% over the period. When it’s considered that the housing market hasn’t exactly boomed since 2010 (quite the opposite in some parts of the country), that’s some result.
Right now, shares trade on a forecast 30 times earnings. That might look expensive but it does begin to make sense when the company’s long history of generating huge returns on the capital it invests is considered. Operating margins are consistently above 70%, there’s stacks of cash on the balance sheet and very little debt.
A valuation approaching £6bn suggests management might struggle to replicate this incredible growth going forward, but I suspect the firm’s dominance of its industry means it will continue rewarding investors. Indeed, the recent uplift in sentiment in the housing market following the election can only be good news for Rightmove.
Boasting a compound annual growth rate of 32.34%, the company providing the second-highest returns was Melrose Industries (LSE: MRO). For those unfamiliar with the name, the £12bn FTSE 100 business specialises in buying manufacturing firms with strong fundamentals and then setting out to improve their performance.
Based on its price movement over the last decade, you could say Melrose is pretty good at what it does. Back in January 2010, the stock could be yours for around 18p. Today, it’s available for 233p.
With shares currently trading on 16 times forecast earnings (and coming with a seemingly-secure 2.1% yield, covered well over twice by profits), I think there’s still money to be made. Indeed, management reported in November that recent trading had been in line with expectations.
And the winner is…
Occupying top spot on the list of best performing shares is equipment rental company Ashtead (LSE: AHT).
According to Refinitiv, £1,000 invested in the firm at the beginning of 2010 — when the shares were trading around 85p a pop — would be worth around £35,611 at the end of 2019, assuming all dividends had been reinvested (something we heartily recommend at the Fool UK). All told, the company achieved a staggering compound annual growth rate of almost 43% over the period.
Can Ashtead’s outperformance continue? Its latest results were certainly encouraging, with the company posting a 14% rise in revenue (to £2.68bn) and 6% rise in pre-tax profit (to £690m) over H1. What’s more, the stock trades on just 12 times earnings. Considering the high profit margins the company is able to achieve, that still looks great value to me.
Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of Melrose. The Motley Fool UK has recommended Rightmove. 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.