The S&P 500 is an index that tracks 500 of the largest companies listed on US stock exchanges. It’s widely regarded as one of the best trackers of shares to buy in the US, delivering a compound annual return of 10.2% since 1957.
Since January 2019, investors in the S&P 500 have enjoyed gains of 84%. But despite these impressive results, several UK stocks have outperformed the S&P 500 in the past five years.
I’m looking at three impressive stocks that make me proud to be British.
BAE Systems
The largest defence contractor in Europe, BAE Systems (LSE:BA.) is a UK-based company with consistently impressive results. Now at £11.66 per share, it’s up 135% since early 2019. The share price shot up in early 2022 when the Ukraine conflict prompted demand for increased defence spending in Europe. Following the escalation of geopolitical tensions in the Middle East towards the end of 2023, the price increased even more.
But such rapid growth comes at a cost. With such a high share price, there’s little room left to grow. Analysts predict a lacklustre 3.3% earnings growth rate for BAE and, with a dividend yield of only 2.4%, it leaves little to be desired. I still think it’s a great stock that would make a solid addition to my portfolio, I just wish I had bought in earlier.
AstraZeneca
AstraZeneca (LSE:AZN) is also a defence company of sorts, albeit for the human body. The Anglo-Swedish pharmaceutical firm became a household name during the pandemic due to its COVID-19 vaccine. Recently, it announced a $1.2bn deal to acquire NASDAQ-listed Gracell Biotechnologies, a Chinese biopharmaceutical company dealing in cancer and autoimmune disease treatments. Unlike AstraZeneca, Gracell has struggled to turn a profit, with its shares down 60% since listing.
AstraZeneca’s share price is up 89% in the past five years, yet analysts still estimate it’s trading 45% below fair value. Earnings grew 189% in the past year alone and are forecast to grow a further 17.3% per year. Numbers like that are hard to ignore – so what’s the catch?
Debt, of course.
An eye-watering £22.3bn worth.
Although it has more than sufficient equity to cover it, AstraZeneca’s short-term assets fall short of both its short-term and long-term liabilities. I wouldn’t say it’s a huge concern, but something I’d keep an eye on if I were a shareholder.
London Stock Exchange Group
The London Stock Exchange Group (LSE:LSEG) is another company I wish I’d clocked onto earlier. The shares are up 111% in the past five years, and almost 10 times higher than they were 10 years ago. More than just the company that runs the London Stock Exchange, the London Stock Exchange Group has a range of subsidiaries, including the Italian Stock Exchange, Refinitiv, FTSE Group, and FTSE Russell.
While the London Stock Exchange Group did a great job outperforming the S&P 500 over the past five years, recent results are less impressive. Profit margins are down to 8.2% compared to last year’s 11.9% and its future return on equity (ROE) is only 8.8%. Coupled with a dividend yield of only 1.2%, these stats don’t convince me to dive into the shares right now – but they’re on my radar.
