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Others FTSE 100 Stocks often grab the headlines and yet strive to create wealth for their investors. Others deliver quietly. Today, I’m looking at the last two that were doing better than the index.
High stock
Assignments to a home goods retailer The next one (LSE: NXT) has been on a tear, up 43% in the past 12 months and 26% in 2024 year to date. This compares (very) favorably with the FTSE 100’s gains of 8% and 7% respectively.
The company’s most recent update gives me a snapshot of why things are going so well. In September, Next raised its full-year profit forecast to £995m after full volume sales in the first six weeks of H2 “materially exceeded” expectations.
So much for the cost of living issue – this company is firing on all cylinders!
A great seller
Interestingly, the stock is now changing hands at a price-to-earnings (P/E) ratio of 16. That’s on the expensive side when it comes to cyclical consumer stocks. Therefore, Next needs to continue to excite the market.
There is one more thing that I noticed. It was recently announced that chairman Lord Wolfson has sold 290,000 shares, worth more than £29m.
The fact that the index’s longest-serving CEO chose to issue such a large amount of stock now is worthy of attention. I would be tempted to do the same, if only because fashion marketing is a notoriously difficult game. The following is also heavily dependent on the UK market, although it is now looking overseas.
It will be interesting to read the Q3 trading statement – due on October 30 – and note the market’s reaction to it.
Riding the rebound
The second highest performing company in the FTSE 100 Intercontinental Hotels (LSE: IHG). Its value increased by 40% last year and 19% in 2024.
Maybe this company is not a household name. But at least some of its 19 hotel brands — including Holiday Inn – will certainly be familiar to many if the massive recovery in demand following the pandemic is anything to go by.
In other parts of the world, trade remains at a high level. In August, Intercontinental reported 3.2% Q2 revenue growth per available room (RevPAR). Business in the US has been very good.
Fully informed?
As a result, this business scores highly when it comes to operating margins and return on investment. But again as follows, its valuation now looks like a bubble.
An AP/E of 25 isn’t ridiculous, at least relative to your average US tech titan. But I have a few concerns.
Despite those big gains, stocks have been volatile over the summer due to sluggish trade in rivals, particularly in Asia. In line with this, Intercontinental RevPar in China decreased by 7% in Q2. There are also concerns that the US may be entering a recession.
The trade update on 22 October may provide some clues as to where to go from here. I would say that much depends on whether the recently announced stimulus measures in China are able to reverse the slow economic growth. The Federal Reserve’s desire to find a ‘soft landing’ for the US economy could also put a damper on the firm’s outlook ahead of the trading session.
With this in mind, I am in no rush to buy today. But I may have bought the dip.
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