Oliver Ralph wrote an interesting article for the FT on Monday. It was entitled “Let’s hear it for the FTSE 100’s magnificently unglamorous seven” and covered the history of Vodafone which has halved its share price in the last two decades while unglamorous Bunzl and Howdens have increased their share prices by 565% and 488% respectively.
Other well-known companies who have done poorly are Barclays and HSBC who did not make it into positive territory while BP, Tesco and GSK did but still underperformed the FTSE-100. Meanwhile lesser-known companies such as Compass, Diploma, Intertek, Experian, Howdens, Bunzl and Relx have done a lot better.
Vodafone should have done well operating in the high growth sector of mobile communications and I looked at them more than once when they were tipped as “cheap” but never purchased the shares. But I have held Diploma, Experian and Relx so it seems I may not be completely daft after all.
The article mentions the acquisition strategies of the successful companies – basically small and low risk ones are preferred.
My prejudice against banks has also worked out well and a preference for smaller well-managed companies with high returns on capital has been successful – Diploma is a classic example.
It’s an article well worth reading. And maybe I should look at Howden and Bunzl to see if they are likely to keep up their performance.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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