I added a handful of new FTSE 100 shares to my portfolio last year, notably Rolls-Royce. Amazingly, the stock ended 2023 as Europe’s best-performing blue-chip!
Here are two other Footsie investments I made. Both are very different.
Growth stock
A new buy for my portfolio last year was Ocado (LSE: OCDO), the online grocery fulfilment firm.
This isn’t your average FTSE 100 stock. It’s a founder-led firm pursuing a huge market opportunity with proprietary robotics and artificial intelligence (AI) technology.
It has built automated warehouses across the world in partnership with leading grocers like Kroger and Japan’s Aeon. During H1 2023, this Solutions division grew revenue 59% year on year to £198m.
In November, however, the company signed its first deal outside of groceries. This was with McKesson, a leading drug distributor, to provide it with automated fulfilment technology.
Ocado will get upfront fees during construction then another payment when the distribution site is completed. Afterwards, it’ll receive annual fees for maintaining the warehouses, with the deal being cash and EBITDA positive next year when installation is complete.
The firm’s robotic technology has been developed for online grocery fulfilment, which is extremely challenging due to the variety of product shapes and sizes, high turnover, different temperatures, and so on. Less complex areas of e-commerce will surely be much easier. I’m expecting more such deals.
Less exciting to me is Ocado Retail, its 50/50 joint venture with Marks & Spencer to deliver the supermarket’s groceries. Formed in 2019, this partnership hasn’t exactly set the world on fire so far.
Indeed, M&S CEO Stuart Machin said last year that it could take another three years for the venture to bear fruit. Any further challenges here could create headwinds for the Ocado share price. It remains the company’s largest business but achieving high growth and regular profitability has proven difficult.
Nonetheless, I’m excited about the company’s long-term growth potential. Advances in computing are driving improvements in robotics, which should improve Ocado’s offering and attract more partners searching for efficiency savings through automation.
World-class hedge fund
My second FTSE 100 investment last year was Pershing Square Holdings (LSE: PSH). This is an investment trust that offers exposure to the hedge fund managed by star US investor Bill Ackman.
Now, this might not be suitable for risk-averse investors as Ackman runs an incredibly concentrated portfolio of just eight stocks. This can present risk if a couple badly underperform. Plus, the fund uses derivatives, which can drive huge returns but are also complex and add more risk.
However, Pershing delivered a 28% return last year, which is incredible considering it only held one ‘Magnificent Seven’ stock. That was Alphabet — Ackman’s only buy in 2023 — which surged around 60% since he first bought it.
Another top stock was Chipotle Mexican Grill, which spiked 65%. Ackman bought the stake in 2016 for an average cost of around $405 and it’s now trading at $2,236.
What I also like here is the manager’s track record of well-timed macro bets. The fund made market-thumping returns during the pandemic and another $200m last year betting against US 30-year treasury bonds.
Despite this, Pershing Square shares are currently trading at a wide 31% discount to net asset value. So I think it could be one for investors to consider.
