The FTSE 100 shares that have beaten the NASDAQ

The NASDAQ 100 index has been one of the best performing indices of the last 25 years, returning an average 8.8% annually since January 2000. To put that in pounds and pence, £10,000 invested in the index would now be worth £84,473 before fees, even throwing some shade on the broader US stock market in the form of the S&P 500, which is itself no slouch on the performance front.

The NASDAQ 100 index is comprised of the biggest stocks listed on the NASDAQ stock exchange, which tends to have a heavy weighting to technology companies. Technology stocks currently make up 50% of the index, with the biggest constituents being Apple, Microsoft and Nvidia. What’s particularly impressive about the NASDAQ’s incredible 25 year returns is they have been generated despite the dotcom crash of the early 2000s. Between January 2000 and March 2003, the NASDAQ 100 index fell by a stomach-churning 72%.* But returns from the technology sector in recent years have more than made up for that disastrous performance. Over the last ten years, the NASDAQ 100 index has returned an astounding 19.8% per annum.

FTSE 100 shares versus the NASDAQ

Since January 2000, the FTSE 100 has returned 4.6% per annum. Pedestrian by comparison to the NASDAQ 100, but actually not a bad result seeing as this period began with one of the biggest market meltdowns in history. What’s perhaps surprising then, is that almost half of the current FTSE 100 members (48 to be exact) have outperformed the NASDAQ 100 since the turn of the century.

The top ten performers are listed in the table below. At the top of the tree is DCC, which has returned a compound 26.1% per annum since the turn of the century. It’s not a household name, but the energy, healthcare and technology company has some characteristics in common with Warren Buffett’s Berkshire Hathaway, having started life as a venture capital investor which became a conglomerate of operating businesses.

More familiar names will be JD Sports and Next, which have performed exceptionally well despite having to navigate a shift in retail from physical to online sales. Games Workshop has also experienced fantastic growth from selling fantasy miniatures to a devoted customer base of collectors and gamers. On a very different theme, shares in the London Stock Exchange have provided extremely agreeable returns to long term investors. Stock trading now actually makes up a minority of its revenues, with data analytics and benchmarking proving to be lucrative business lines.

How have so many FTSE 100 shares beaten the NASDAQ 100?

The fact so many UK shares have outperformed the NASDAQ, some by a considerable margin, shows that it’s perfectly possible for London listed businesses to perform exceptionally well in the long term. But on the face of it, it’s puzzling to see so many shares in the FTSE 100 beating the NASDAQ 100, when the FTSE 100 index itself has fallen so far behind. Partly this comes down to the fact that within any index, there will always be a spread of performance from the companies within it; some good, some bad. But partly it’s also a result of the fact that indices themselves aren’t static.

We tend to think of the FTSE 100 as one constant thing, but actually it changes regularly as companies are relegated from the index and others are and promoted into it, depending on their share price performance. Looking at the top ten performers since January 2000 in the table above, none of them were actually in the FTSE 100 index in January 2000. In other words, these were more modestly sized companies which have done so well that they have pushed their way into the blue chip index, either through organic growth, or mergers and acquisitions, or both.

There are some stocks which were in the FTSE 100 in January 2000 which have outperformed the Nasdaq 100 though. Diageo, the drinks giant, has returned 9.1% per annum since the turn of the century, ahead of the 8.8% provided by the NASDAQ 100. Meanwhile the consumer goods giant Unilever has returned 9.9% over this period. The defence and aerospace company BAE has returned 10.2% per annum, the mining company Rio Tinto has returned 10.6%, and the data analytics firm RELX has returned 11.8%. And despite the fact smoking has become much less popular in many countries, British American Tobacco has returned a compound 15.2% a year for investors since January 2000.

This data shows that individual UK-listed companies both big and small have delivered some spectacular returns to investors over the long run, offering some reassurance for investors who have invested in UK stocks and funds, and have perhaps watched the gains provided by the US stock market from the sidelines. However, while 48 stocks in the current FTSE 100 have outperformed the NASDAQ 100 over 25 years, if you look at the last decade, this number falls to just three. So as well as exhibiting some nifty stock picking skills, investors also have to exercise patience to harvest their rewards.

*Source: FE, price return in GBP