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He FTSE 100 It is a great place to shop, as history has shown us. The UK's main stock market index has returned an average annual return of 7.5% since it began trading in the 1980s.
Sometimes investing in stocks can bring about a fair amount of ups and downs. But with the right strategy, it can also be a very lucrative way to make money in the long term.
My goal is to build wealth with a balanced portfolio of reliable/'boring' stocks and riskier, cyclical ones that can deliver amazing growth during good times.
support services business Bunzl (LSE:BNZL) is one of my favorite boring stocks in the FTSE 100. That's why it's one of the biggest holdings in my portfolio at the moment. Let me tell you why I plan to keep this company “forever.”
Strong profit growth
At first glance, Bunzl did not set the situation alight with its full annual trading update today (February 26). In fact, at £32.12 per share, the company lost 3% in value as it announced a drop in annual sales.
The company's revenue fell 2% during 2023, to £11.8 billion.
But there was nothing here that scared me as a shareholder. This sales reversal was partly due to price normalization, as cost pressures eased and Bunzl reduced price increases.
Indeed, the London business had another stellar performance (despite falling volumes in some territories). Pre-tax profit soared 10.1% year-on-year to £698.6m, or 4.4% on an adjusted basis to £853.7m.
Operating margins increased to 8% from 7.4% in 2022, which in turn lifted operating profit to £789.1 million, a year-on-year increase of 12.5%.
Bunzl also continued to generate huge amounts of cash, with cash conversion for the year of 96%. As a result, it increased the annual dividend for the thirty-first consecutive year.
“Constant whirl”
Analyst Matt Britzman of Hargreaves Lansdown He described Bunzl as a “constant swirl”following Monday's solid update.
He notes that Bunzl simply “continues its business of selling essential goods and finding margin-enhancing acquisitions“. And, critically, Britzman comments that the firm “he's very good at it.”
The good news is that the company shows no signs of slowing down in its brilliant acquisition-based growth strategy. Last year it made 19 additional purchases and today announced one more acquisition in the United Kingdom and another in Finland.
The company now operates in 33 territories following this latest acquisition. A strong balance sheet gives you the means to continue making acquisitions that increase your profits.
A superior purchase
It is perhaps not a surprise to see Bunzl's share price fall in trading on Monday. Given the strength of recent months, some weakness can be expected as traders take profits.
I think the company is still one of the best buys today. This is despite its forward price-to-earnings (P/E) ratio of 17.5 times. A premium rating like this could lead to further declines in the share price if trading suddenly takes a turn for the worse.
But I think Bunzl stock deserves this high valuation. Revenue is now 28% above pre-pandemic levels. And I fully expect them to continue to grow strongly as acquisitions continue to pile up.
