Some people sniff at the prospect of investing in UK shares. Instead, they turn their head towards America and look longingly at the fast-growing enterprises listed in New York.
But I recently read an article by value investor Mark Simpson. And he pointed to a 2018 study carried out by outperforming fund manager Nick Train of investment company Lindsell Train.
UK shares have been awesome!
According to Train’s research, UK shares have been an awesome source of super-performing investments for shareholders. Twelve companies in the FTSE 350 index had at some stage over the previous few decades delivered at least a 100-fold increase in their share prices.
Those great long-term moves were delivered by Ashtead, Antofagasta, DCC, Next, Randgold Resources(merged with Barrick Gold in December 2018), Sage, Cairn Energy (now Capricorn Energy), Capita, Daejan Holdings (now a private company), Domino’s Pizza, JD Sports and Tullow Oil.
But they aren’t the only big performers we’ve seen on the London Stock Market. Train lowered his sights to identify companies from the FTSE 350 that had delivered a return of between 50 and 100 times. And that led to him adding another 12 to the list.
And that’s not all. Lowering the hurdle further, he identified another 65 UK shares that had returned between 20 and 50 times. But Train was on a roll and found a further 82 companies that had seen their shares rise at least 10-fold since the mid-1980s.
Altogether, Train found that 171 companies of those in the FTSE 350 in 2018 had been big investment winners for shareholders. And that’s almost 50% of all the stocks in London’s major indices. Indeed, the FTSE 100 and the FTSE 250 together form the FTSE 350.
Small could be lucrative
It seems to me that the odds of finding decent long-term investments among UK shares could be quite good. But it’s fair to say that many of those multi-bagging shares might have been too small to feature in the FTSE 350 index when they began their super-performance run.
But that’s okay with me. I’m happy to search among smaller companies for shares that could go on to deliver spectacular long-term gains for their shareholders. And the recent bear market for many UK shares we’ve just seen could work to my advantage. Indeed, if I was 37-or-so with no savings, I’d aim to invest regularly in cheap UK shares and aim to retire rich.
However, holding on to UK shares while they deliver outstanding returns over time could be difficult. Volatility could play havoc with my emotions and shake me out of positions. I may consider valuations to be too expensive and end up selling too soon. Or I could sell out of boredom if nothing much happens for a few months or years.
On top of that, despite carrying out research and analysis, I end up picking shares that go on to deliver lacklustre performance. I could even lose money on UK shares over time. Nevertheless, the risks of share ownership won’t stop me trying to find the UK’s fledgling growth companies. And if I was 37 with no savings, I’d aim to start my search right now.
