While the UK’s FTSE 100 has had a bumpy ride over the last 20 years or so, some companies have made investors fortunes.
The index of blue-chip stocks includes household name stocks such as BP, Lloyds, Rightmove, Rolls-Royce, Tesco, Whitbread and Vodafone.
Yet the best performer of the last 20 years has been travelling under the radar. Ashtead Group has given loyal investors a total return of a staggering 45,533 percent in that time.
Its share price jumped from 13p to today’s £51.34, a rise of 39,392 per cent. The company also paid a heap of dividends in that time and investors who automatically reinvested them back into the stock would have multiplied their returns.
Somebody who invested just £1,000 in Ashtead back in June 2003 would have £456,330 today with dividends reinvested, according to online investment platform AJ Bell.
Ashtead rents construction and industrial equipment to builders and other businesses, to save them from having to buy it themselves.
It rents out everything from diggers, cranes, scaffolding, pumps and ventilation systems to crowd barriers for music festivals.
Business has boomed since the pandemic, as construction firms have turned to the rental market due to a shortage in machinery.
AJ Bell’s head of investment analysis Laith Khalaf said the £22billion group has one huge factor in its favour, as it generates 80 percent of its revenues from the booming US market, where it operates under the name Sunbelt Rentals.
Khalaf said the booming US economy has boosted revenues while the strong dollar makes them more even valuable when converted back into pounds. “This combination has helped make Ashtead the big stock market winner over 20 years.”
It is the second best FTSE 100 performer over the last 10 years, too, with a total return of 800 percent, which would have turned £1,000 into £9,000.
It’s the third best performer over five years, too, rising 145 percent in that time, which would have turned £1,000 into £2,450.
These figures show the value of long-term investing as share price growth and dividends compound over periods measured in decades.
Ashtead has regularly hiked its dividend, giving investors a rising income.
Better still, it recently spent $1billion (£800million) buying its own shares and now plans to purchase a further $500million.
Share buybacks reduce the amount of stock on the market, boosting the value of the remaining shares.
Ashtead still has strong prospects but like any stock, it also brings risks.
It is having to invest huge sums in the latest high-tech kit and its capital expenditure could potentially hit $3.7billion this year, then rise to $4.4billion the year after. This will eat into profits in the shorter run.
If the US falls into recession, as many fear, that would slow economic activity and demand. It would aslo weaken the dollar, hitting Ashtead’s US revenues.
Chief executive Brendan Horgan said full-year results are beating previous expectations and “the board looks to the future with confidence”.
Victoria Scholar, head of investment at Interactive Investor, said nobody should invest in Ashtead or any other stock on the assumption it will repeat past successes.
As a general rule, only invest in individual stocks as part of a balanced portfolio for a minimum period of five to 10 years, as your capital is at risk and you could lose some or all your money.
That could happen with Ashtead, too. Although right now, it’s booming.