1 FTSE 100 stock I’d buy today to aim for a million

ISA millionaires tend to buy dividend stocks. But Stephen Wright thinks the FTSE 100’s growth stocks that may be better for investors building wealth.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

A handsome mature bald bearded black man in a sunglasses and a fashionable blue or teal costume with a tie is standing in front of a wall made of striped wooden timbers and fastening a suit button

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

According to AJ Bell, all of the top 10 stocks owned by ISA millionaires on its platform are members of the FTSE 100. And most of them are dividend stocks.

Shell, Lloyds Banking Group, Aviva, and National Grid all make the list. But they’re not the stocks I’d choose to try and build wealth if I were starting out today

Growth vs income

For the vast majority of people, building a £1,000,000 investment portfolio’s going to take time. That means it’s important to identify companies that have great long-term prospects.

Should you invest £1,000 in Unilever 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 Unilever made the list?

See the 6 stocks

I’m not saying Lloyds and National Grid are going to do badly over the next 20 or 30 years. But when I think about which stocks will be worth more in the future, these aren’t the names that come to mind.

Over time, what makes the value of a stock go up is the underlying business finding ways to increase its earnings. And that’s difficult to do for a company that distributes a lot of its income to shareholders.

With a couple of exceptions, I’d focus on the companies that aim to reinvest the cash they generate to grow future profits. That’s where I think the best chance of reaching a million comes from.

A high-performing conglomerate

Halma’s (LSE:HLMA) a great example of the kind of stock I have in mind. The company does pay a dividend, but this only accounts for around a third of the firm’s net income. 

Meanwhile, the business has been investing for growth. And over the last 10 years, revenues have increased by 180% a year and earnings per share are up 154%. 

Created with Highcharts 11.4.3Halma Plc PriceZoom1M3M6MYTD1Y5Y10YALL15 Aug 201915 Aug 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

During this time, the Halma share price has gone from £6.09 to £25.18 – a 313% increase. That’s enough to turn a £1,000 investment a decade ago into £4,134 today. 

The company’s shares going up faster than its earnings makes it more expensive on a price-to-earnings (P/E) basis than it used to be. And that’s a risk that often comes with investing in growth stocks.

Compounding

Halma’s an industrial technology conglomerate. The key to its past growth has been a combination of adding new businesses to its organisation, as well as helping them grow and operate more efficiently.

Opportunities to grow by acquisition can become more limited as a company gets bigger. This has been true of the likes of AMETEK, Dover, and Illinois Tool Works.

Halma though is a lot smaller than any of these companies, which makes me think its size isn’t going to be an issue for some time. That’s why I’d back the company to keep doing what it’s been doing.

With revenues currently growing at 10%, this would seem to be the case so far. And if it can keep doing this, I think it will more than justify its current share price over the long term. 

Aiming for a big payday

Past performance isn’t a guarantee of future returns. But I think Halma has a business model and an approach that’s going to prove durable for some time. 

A dividend yield below 1% might not make it the investment of choice for ISA millionaires. But it’s the stock I’d choose to try and get to that level.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in Unilever 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 Unilever 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.

Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Aj Bell Plc, Halma Plc, and Lloyds Banking Group Plc. 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.

More on Investing Articles

Thoughtful man using his phone while riding on a train and looking through the window
Investing Articles

Up another 6% in the last week! Is the BP share price ready to go gangbusters?

The BP share price has been on fire lately. Harvey Jones looks at what's driving the FTSE 100 stock's recovery,…

Read more »

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

High-flying IAG shares are up 50% in 3 months but I still think they’re too cheap to ignore!

Timing the market is almost impossible but Harvey Jones managed it when buying IAG shares in April. Can the FTSE…

Read more »

ISA coins
Investing Articles

Want to earn £1k+ in annual passive income from a £20k Stocks and Shares ISA? Consider this!

Our writer sets out some points to consider when trying to target a four-figure income from one year's Stocks and…

Read more »

Rolls-Royce's Pearl 10X engine series
Investing Articles

3 risks to the Rolls-Royce share price, after its 979% climb

After a 979% growth in the Rolls-Royce share price, our writer still sees things to like in the business. But…

Read more »

Buffett at the BRK AGM
Investing Articles

Can Warren Buffett principles help when looking for AI stocks to buy?

Billionaire Warren Buffett has made a fortune by applying old investing principles to new industries. Can our writer learn some…

Read more »

Portrait of a boy with the map of the world painted on his face.
Investing Articles

Up 36% in 3 months! Is my nightmare purchase of Glencore shares about to come good with a vengeance?

When Harvey Jones bought Glencore shares two years ago, he didn't expect to find himself sitting on a 45% loss.…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

£1,000 invested in Lloyds shares 5 years ago is now worth…

Anyone who’s owned Lloyds shares over the last five years is probably laughing right now with impressive returns that crushed…

Read more »

A mature woman help a senior woman out of a car as she takes her to the shops.
Investing Articles

If a 50-year-old puts £500 a month into a SIPP, here’s what they could have by retirement

Investing £500 a month with a SIPP could build a pension pot worth £269,900 or quite a bit more over…

Read more »