As I explained on Monday, it might seem that it’s not been a great five years for the FTSE 100. The Footsie has gained 530 points since 2016 to trade around 6,618 at Tuesday’s close. That’s a return of 8% for half a decade — an average of 1.6% a year — for taking equity risk.
But adding in yearly dividends of around 4% boosts this return to 5.6% a year. That’s a lot better than top savings accounts. However, it’s easily beaten by several foreign stock markets. The US S&P 500 has almost doubled over five years, before dividends. Today, it stands around 100 points below its record high, hit a week ago.
FTSE 100: 66 winners and 31 losers since 2016
Then again, not all FTSE 100 shares have disappointed investors these past five years. Some shares have done extremely well, while others have crashed horribly. Of the 97 shares in the FTSE 100 for a full five years, 31 have fallen in value. These declines range from 2.5% to a spectacular crash of 71.8%. Across these 31 losers, the average price decline is almost a quarter (22.9%).
This leaves 66 winners, whose share prices have climbed between a tiny 0.1% and a colossal 805.7%. These gainers include 26 shares that have at least doubled in value since 2016. Of these, 12 shares have tripled or more since 2016. The average gain across these FTSE 100 champions is a hefty 122%. Nice.
The Footsie’s star performers over five years
Using Tuesday’s closing prices, these are the FTSE 100’s five best performers since February 2016. As you can see, each has produced mouth-watering gains for patient investors.
Ocado Group (Online grocer) +805.7%
Evraz (Steelmaker and miner) +748.8%
Anglo American (Global miner)+480.3%
Scottish Mortgage Investment Trust (Tech fund) +410.9%
Ashtead Group (Equipment rental) +349.5%
Would I buy Ocado today?
With its share price having risen more than nine-fold since 2016, Ocado is very highly prized today. Right now, this FTSE 100 share stands at 2,335p, down 66p (2.8%). At this level, the online grocer and seller of automated-warehouse technology is valued at £18bn. Tesco, the UK’s biggest and most profitable supermarket by far, is valued at £16.7bn. Why the bumper valuation for Ocado? It’s because Ocado is rated in line with US tech firms, while FTSE 100 rival Tesco is valued as an old-economy business.
While Tesco has racked up tens of billions of pounds of profits over decades, Ocado has yet to make a penny. But it’s heading that way — and fast. Since launching in April 2000, Ocado has spent many billions investing in growth over 21 years. And growth stocks are very much favoured by investors nowadays, as we see with sky-high US tech valuations. Furthermore, Ocado kept growing strongly during the pandemic, with sales up more than a third (35%) in 2020. This growth surge shrank Ocado’s pre-tax losses to £44m in 2020, versus £215m in 2019. Likewise, Ocado is moving towards profitability and should be a winner in the inexorable drive towards online shopping. This could lead to a substantial surge in future earnings.
But would I buy it? No. Without any historic profits, earnings per share or cash dividends, I can’t value Ocado shares on fundamentals. Indeed, I view Ocado as perhaps the UK’s #1 bubble stock. The shares have fallen 579p — a fifth (19.9%) — from their all-time high of 2,914p on 30 September 2020. Yet even now, I see them as too rich for my blood, so I won’t be buying this FTSE 100 share for my family portfolio!
