Image source: Getty Images
He FTSE 100 has had a pretty good run so far this year, up 7.3%. However, I have noticed that three companies in the index outperform this performance. I'll take a look at each of them and discuss which one I would add to my portfolio if I had the extra money to do so.
Halma
Halma (LSE:HLMA) is a group of global safety equipment companies, specializing in hazard detection and life protection.
Its shares have risen 14% this year, providing a good return for investors. It's also been a consistent winner for a while, growing 1,066% over the last 15 years.
The company has achieved its strong growth primarily through acquisitions. In FY24, revenue grew 10% to £2bn and adjusted profit before tax (PBT) grew by the same percentage to £396m. That's pretty impressive.
There is inherent risk in growth through acquisitions. If profitability of the acquired company does not materialize, a large portion of the debt associated with the acquisition still remains to be repaid. However, as of July 2024, the company has made 52 acquisitions. Any new ones will make up a small proportion of your total business.
Aviva
Of the three companies I write about, Aviva (LSE:AV) has seen the weakest pace of the FTSE 100, returning 10%.
However, its latest half-year results were quite strong, with operating profit rising 14% to £875m.
Due to the cyclical nature of the financial services industry, the company is vulnerable to changes in macroeconomic conditions. Therefore, the insurance provider may see a drop in demand for its products and services when times are tough. People may cut their insurance to control their spending when the economy is bad.
But this does not seem to be the case now. Aviva saw its general insurance premiums rise 15% to £6bn in the first half of 2024. Plus, economies grow in the long term, so the company's shares should too.
Rolls-Royce
Rolls-Royce (LSE:RR) shares have consistently proven me wrong. Just when I think they have peaked, they once again march upward. They are already up 78% this year after rising 221% in 2023.
As a result, the company has a rather expensive price-to-earnings (P/E) ratio of 31.5. Therefore, its shares could fall quite dramatically due to bad news. Given the fear of a possible recession in the United States, its demand could fall, which may be a catalyst for this.
That said, Rolls-Royce has seen tremendous growth since the pandemic. For example, its PBT almost doubled from £524m to £1.04bn in the first half of 2024.
It also appears that the company has more growth opportunities ahead. It was recently chosen by the Czech Republic's state-owned utility for its small modular reactors (SMR). The SMR market is expected to be worth £295 billion by 2043, so it may provide more fuel for Rolls-Royce's revenues.
Verdict?
I like all three companies, but if I had to choose one it would be Rolls-Royce. Of the three, I think it has the best growth prospects. Although its shares may be expensive now, you could quickly reach this valuation by taking advantage of these opportunities. So if I had extra money, I would buy its shares today.
