This is my favourite stock on the entire FTSE 100 but one thing worries me 

This overlooked growth stock has smashed the FTSE 100 for years. It’s got pride of place in my portfolio yet it’s looking a little unbalanced.

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Earlier this year I noticed that one company on the FTSE 100 had been smashing the market year after year, yet seemed to be overlooked by investors. The stock was private equity specialist 3i Group (LSE: III), and I bought a stake in August and in September.

Since then, 3i Group shares have ticked up slowly but surely, regardless of what the wider market was doing. I’m already up almost 12%.

These are early days but I still feel justified in my decision to buy it, because this appears to continue a long-term trend.

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Power of three

3i’s share price chart shows a steady upward sweep over the years. My table below shows just how consistent it’s been. It’s an unbroken sea of blue.


1 week1 month3 months6 months1 year2 years3 years 5 years
3i Group2.03%8.46%11.37%13.48%60.18%52.49%98.35%157.7%

Only Frasers Group (203.48%) and Ashtead Group (177.46%) have beaten it over five years, but their progress has been more stop-start. One reason is that 3i Group knows what it’s doing, having invested in early-stage growth companies since 1945.

It looks to take a stake in companies for three to five years to add value and exit at a profit. As a result, revenues and profits tend to zip around all over the place, depending on the timing of purchases and disposals. In 2020, pre-tax profits were just £216m. In 2023, they hit £4.58bn. Even allowing for the pandemic, that’s a huge difference. Yet it doesn’t seem to faze investors. They know what to expect.

By contrast, its dividend per share growth has gone only one way. It was 35p in both 2019 and 2020, then climbed to 38.5p in 2022, 46.5p in 2022, and 53p in 2023. If the yield looks low at 3.1%, that’s only because the share price has grown so rapidly.

High interest rates and economic uncertainty are usually bad news for private equity and venture capital, but 3i has done just fine. The investment company’s half-year report on 9 November showed its total return up another 10% to £1.67bn.

The Action end of the portfolio

That was lower than last year’s H1 return of £1.77bn, up 14% on the year. The share price ticked up anyway. The market knows what to expect and likes it. 

Not every portfolio holding has been doing well, for example. Companies in the discretionary consumer spending and cyclical end-markets have slipped. In contrast, its biggest holding, Benelux-based discount chain Action, has been consistently smashing it. Net sales jumped another 30% to €7.9bn in the nine months ended 1 October. 

Action is the fastest growing non-food discounter in Europe with more than 2,300 stores. My worry is that it now makes up a third of the total 3i portfolio, so had better continue bombing along. At some point, there will be a disposal (hopefully a lucrative one). Thereafter, other holdings will have to rise to the challenge.

I’m assuming management has been through similar situations before, and will see this one through. It’s a concern, but not enough to make me rethink my holding. I’ll keep an eye on Action, with a view to buying more shares in 3i Group.

Should you invest £1,000 in Allied Minds Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Allied Minds Plc made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has positions in 3i Group Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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