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The best performing stock in the FTSE 100 in the last five years may come as a surprise to many. It certainly surprised me.
it was not Rolls-Royce, as I initially assumed. That's leading the charge for one, two, three years, but before that I had a horrible time. It is down 3.02% in five years, which shows how bad things were before the recovery.
Equipment rental specialist. Ashtead Group has done well in five years, increasing 165.62% in that time, while Flutter Entertainment has risen 180.63%. However, both are behind number one. One step forward owner of Sports Direct Fraser Group (LSE: FRAS), which rose 207.22%.
A high growth stock
That's hugely impressive, especially for a stock that flies under the radar of many people, including me. Like many people, I seem to have underestimated the business acumen of majority shareholder Mike Ashley. Turns out, he may have known what he was doing after all.
Personally, I thought Ashley was crazy for going to buy shares in bombed-out physical retailers, at a time when the internet was crushing the high street and the cost of living crisis was making shoppers feel poorer. The strategy seemed to border on suicide. Or egomaniac. But there's nothing Ashley and current Frasers chief executive Michael Murray like more than challenging people's low expectations.
If you had invested £5,000 in Frasers Group shares five years ago, you would have £15,361 today. Although I wouldn't rub my hands if I had bought it a year ago. The share price has risen a modest 7.03% since then, turning my £5,000 into £5,352. Of course, the FTSE 100 fell 3.66% during the same period.
I will not have received any dividends because Frasers Group does not pay them. However, last Monday it announced an £80m share buyback, buying 10m of its own shares by April 28 to reduce its share capital.
That's not all Frasers has been buying. In December, she increased her involvement in the troubled fast fashion group. boohoo to more than 17% and then to more than 20% in January. We don't know his intentions yet, but with Boohoo's share price falling 89.47% in three years and 20.57% in 12 months, I suspect he'll find it impossible to resist.
Direct equity
Among the boohoo purchase, Frasers also bought loss-making luxury fashion site Matches for £52 million in cash, increasing Frasers' international exposure and expanding its luxury operations. Frasers is quite a conglomerate. As well as owning Sports Direct, House of Fraser and Flannels, it is gaining ground in ASOS, AO World, curries, n.brown and Hugo Boss.
I missed it five years ago, so would I buy Frasers today? The shares are not expensive and trade at 11.66 times earnings. Markets expect revenues of £5.44 billion in 2023 to reach £5.8 billion in 2024 and £6.12 billion in 2025. That's pretty stable.
Last October, Frasers had net debt of around £570m. Markets see that figure falling to £442m in 2024 and then £275m the following year. Again, firm.
Once inflation is defeated and interest rates begin to fall, buyers will have money to spend. Retail stocks could rally, boosting the value of Ashley's recent cheap acquisitions.
I'm always cautious about buying shares after a good run, and I'll put this one aside as I try to determine where the group's long-term strategy is headed. I was wrong before about Frasers and I could be wrong again.
