The FTSE 100 has had a pretty good run so far this year, rising by 7.3%. However, I’ve noticed three companies in the index that outpace this return. I’ll be taking a look at each of them and discuss which one I would add to my portfolio if I had the spare cash to do so.
Halma
Halma (LSE:HLMA) is a group of global safety equipment companies, specialising in hazard detection and life protection.
Its shares have increased by 14% this year, providing a good return to investors. It has also been a consistent winner for a while, growing 1,066% over the last 15 years.
The company has mainly achieved its strong growth through acquisitions. In FY24, revenue grew by 10% to £2bn and adjusted profit before tax (PBT) grew by the same percentage to £396m. That’s pretty impressive.
There’s an inherent risk with growth through acquisitions. If returns from the acquired company don’t materialise, a lot of debt associated with the acquisition still needs to be paid off. However, as of July 2024, the company has made 52 acquisitions. Any new one will be a small proportion of its overall business.
Aviva
Out of the three companies I’m writing about, Aviva (LSE:AV) has experienced the most tepid beat over the FTSE 100, returning 10%.
However, its latest half-year results were pretty robust as operating profit increased by 14% to £875m.
Because of the cyclical nature of the financial services industry, the company is vulnerable to shifts in macroeconomic conditions. Therefore, the insurance provider may see a fall in demand for its products and services when times are tough. It’s possible people will cut their insurance to control their expenses when the economy isn’t doing well.
But this doesn’t seem to be the case right now. Aviva saw its general insurance premiums rise by 15% to £6bn in the first half of 2024. Furthermore, economies grow in the long term, so the firm’s shares should likewise do so.
Rolls-Royce
Rolls-Royce (LSE:RR) shares have consistently proven me wrong. Just when I think they’ve reached their peak, they once again march upward. They’ve already increased 78% this year after climbing 221% in 2023.
As a result, the company has quite a pricey price-to-earnings (P/E) ratio of 31.5. Thus, its shares could fall quite dramatically on the back of bad news. With fears of a potential US recession, its demand could fall, which may be a catalyst for this.
That said, Rolls-Royce has seen a lot of growth since the pandemic. For example, its PBT almost doubled from £524m to £1.04bn in the first half of 2024.
It also looks like the firm has further growth opportunities ahead. It was recently chosen by the Czech Republic’s state utility company for its small modular reactors (SMR). The SMR market is expected to be worth £295bn by 2043, so it can provide further fuel for Rolls-Royce’s revenue.
Verdict?
I like all three companies, but if I had to choose one it would be Rolls-Royce. Out of the three, I believe it has the best growth prospects. Even though its shares might be expensive now, it could quickly grow into this valuation by taking advantage of these opportunities. That’s why if I had the spare cash, I’d buy its shares today.
The post 3 top FTSE 100 shares! Which one is my favourite appeared first on The Motley Fool UK.
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They’re down 7% but with a 7.1% dividend that’s forecast to rise — is it time for me to buy more Aviva shares?
Here’s the growth forecast for Rolls-Royce shares through to 2026!
Muhammad Cheema has no position in any of the shares mentioned. The Motley Fool UK has recommended Halma Plc and Rolls-Royce Plc. 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.
