Anniversaries are often an opportunity to take stock so the Shares team has had a look at the best performing shares, funds and investment trusts since the magazine’s first issue in September 1999.

Read on to discover the identity of the top performers and find out names we think will continue to impress in the years to come and those where we think the good times might be over. But first, Ian Conway provides a personal perspective on the last 25 years in financial markets.

TWENTY-FIVE YEARS OF CHANGE BUT MUCH REMAINS FAMILIAR 

As the two Ronnies – in this case Lane and Wood – put it so succinctly, I wish that I knew what I know now, when I was younger.

Twenty-five years ago, we were in the midst of the tech bubble, when ‘clicks’ and ‘sticky eyeballs’ were enough to justify sky-high PE (price to earnings) multiple, although in honesty most of the companies coming to market back then had no earnings to speak of.

If memory serves, at one point National Grid (NG.) was co-opted into the tech rally on the basis it was going to send broadband ‘waves’ through its power lines. So much for that idea.

There was without question a colossal misallocation of capital and many of the firms which were purported to be the biggest beneficiaries of the internet ‘revolution’ ended up going bust, losing investors billions of pounds.

Yet the over-investment in high-speed networks paid off, paving the way for much of what we take for granted today – low-cost 4G mobile, data centres, streaming services, even video conferencing and remote working.

In 1999, five years after it was founded, Amazon (AMZN:NASDAQ) was still a book seller in Seattle with its headquarters nestled between a needle exchange and a porn shop and Jeff Bezos was driving a Honda. Allowing for stock splits, if you had invested $1,000 in Amazon at its IPO (initial public offer) in 1997 your shares would be worth just shy of $2.5 million today.

Similarly, Google, launched in 1998 by Larry Page and Sergey Brin, was a pure search engine with ‘no weather, no news feed, no links to sponsors, no ads, no distractions, no portal litter’, according to the trade press of the time.

An investment of $1,000 at Google’s IPO in 2004, again adjusting for stock splits and allowing for Alphabet (GOOG:NASDAQ) shares having fallen over 20% from their recent highs, would now be worth around $1.7 million. Ho hum.

FOREVER BLOWING BUBBLES

As the tech rally deflated through the mid-noughties, another bubble was forming in US real estate, helped partly by aggressive rate cuts from the Fed and by compliant banks, who were playing both sides by lending willy-nilly to buyers and securitising those loans to sell on to yield-hungry institutions.

Eventually the whole house of cards came tumbling down in 2007, as author Michael Lewis captured so well in The Big Short’, but not before hundreds of billions more dollars had been misallocated.

The fall-out from the housing crash led to the demise of several eminent Wall Street institutions and presaged another round of Fed rate cuts, but it would be a long time before the US economy found its feet again. Meanwhile, on the other side of the world, China had emerged as a new economic powerhouse.

Its insatiable appetite for raw materials, especially copper and other metals, led to a creeping bubble in commodity stocks which culminated in the mining sector becoming the largest component of the FTSE 100 index.

Miners reached their apotheosis in 2011 when South African-based producer and distributor Glencore (GLEN) came to market in the biggest UK IPO in history, generating a fortune for its founders and traders, many of whom made personal windfalls of more than $500 million, yet within five years its stock price had collapsed almost 90%.

In the last decade we have seen more mini-bubbles – in the shares of electric vehicle makers, in crypto-currencies, in government bonds (remember negative real yields?), in leverage itself and arguably in the valuation of AI (artificial intelligence) and obesity-related stocks.

SAME AS IT EVER WAS

So, 25 years after Shares first rolled off the press, what hasn’t changed? Human nature, for one – there will always be those who love to speculate, and no matter what ‘guard rails’ are put in place to try to stop the worst excesses of over-trading, we are still going to get booms and busts, of that much we are sure.

In terms of assets, shares have continued to outperform bonds on a total return basis over the last quarter-century and we can’t see that changing, but as ever price is what you pay, value is what you get, so if you overpay for a stock you still face the possibility of losing capital.

Despite regular claims that the era of fiat money is over, the dollar remains the world’s reserve currency and we don’t see that changing either. For the same reason, speculators are always going to look for a ‘carry’ trade, where they can borrow heavily in one currency and invest the proceeds in another, and as recent experience has shown, when these trades eventually unwind they can cause massive volatility.

Finally, markets today are just as inefficient as they were 25 years ago, which is good news for professional stock pickers and those with the skill and the knowledge to know where to look for bargains.

BEST PERFORMING UK STOCKS OF THE LAST 25 YEARS

Ashtead (AHT) £52.30

When considering which of the winners of the past 25 years to back for the future we weighed up a variety of factors – not just the quality of the company in terms of its return on capital employed and how it allocates that capital but its ability to set prices, the markets in which it operates and the big drivers of its business.

For equipment hire firm Ashtead (AHT), that means the US and Canada where it does most of its business, and the infrastructure market which drives demand for its products and services.

In the US the firm operates close to 1,200 hire centres, while in Canada it has 135 outlets, and it grows that number each year by reinvesting its cash flows into opening more centres and buying small local rivals which it quickly absorbs.

On top of a multi-billion-dollar annual hire market which is continually growing, the firm is seeing an accelerating structural change from ownership to rental as well as increased demand from non-construction sectors and new markets.

The shares are priced at around 15 times forward earnings, which we believe it can continue to grow by around 15% per year, making the valuation appear reasonable. 

JD Sports Fashion (JD.) 144p

The self-styled ‘King of Trainers’ has been a stand-out performer over the last 25 years and has grown its earnings at a compound annual rate of around 18%, but we can’t see it maintaining a similar growth rate going forward.

Retailing is a difficult market at the best of times given changing consumer tastes, and the athletic footwear market is incredibly competitive, especially in the US which is JD’s big bet following the acquisition of rival Hibbett.

Established brands like Adidas (ADS:ETR) and Nike (NKE:NYSE), which form the backbone of JD’s business, face growing competition from newcomers like ON Holdings (ONON:NYSE) and Hoka, owned by Deckers Outdoor (DECK:NYSE).

In particular, On’s strategic partnerships with high-profile figures like Zendaya and Roger Federer and its investment in innovation have boosted its visibility and credibility as a premium sportswear brand, while its multi-channel strategy has given it pricing power over retailers and wholesalers.

In August, JD confirmed full-year earnings would be in the bottom half of the range of estimates, despite what should have been a strong 2024 due to the Euros and the Olympics, and while the rating isn’t overly demanding we think the risks are to the downside.

BEST PERFORMING FUNDS OF THE LAST 25 YEARS

Janus Henderson Global Select Acc (B68SFJ1) 466.4p

In existence for more than 40 years, over the last quarter of a century Janus Henderson Global Select (B68SFJ1) – previously known as Janus Henderson Global Equity – has chalked up an impressive performance which compares favourably with more illustrious counterparts.

The name change followed the appointment of Julian McManus as lead portfolio manager in 2023 with the portfolio becoming less concentrated than it had been historically, although at between 40 and 65 names this remains a fairly focused fund.

It is also a fund which deviates significantly from its benchmark, and we think a balanced approach with a mix of stocks from sectors like energy, financials and defence alongside technology could be a successful one in the years and decades to come.

The likes of Microsoft (MSFT:NASDAQ), Amazon (AMZN:NASDAQ) and Taiwan Semiconductor Manufacturing (TSMC:NYSE) will be holdings in lots of global funds but others, like Japanese insurer Dai-ichi Life (8750:TYO) and US power generation company Vistra (VST:NYSE), not so much.

The aim is to beat the MSCI All-Countries World index by 2.5% per year over a five-year period. This is underpinned by investing in stocks where McManus and fellow manager Christopher O’Malley believe free cash flow growth potential is being underestimated by the market. Ongoing charges are reasonable at 0.86%. [TS]

INDIAN FUNDS

Several India-focused funds populate the list of best performers over the last quarter century, but there are reasons to think the path ahead may not be so smooth, not least high valuations. India’s equity market has been on a relentless bull run since the pandemic, but recent lacklustre earnings and slowing GDP growth may mean stocks take a pause, for a bit anyway.

Since the low of the Covid outbreak in March 2020, the blue-chip NSE Nifty 50 index (the equivalent of the FTSE 100) has soared nearly 200%, lifting the total market cap of Indian equities to more than $5 trillion. In February 2024, the UK market was worth about $3.1 trillion.

While experts almost uniformly see India as a long-run growth opportunity, recent data might suggest that Indian stocks are a bit too hot to handle right now and there is the potential for growing pains in the economy. 

‘The attractiveness of the Indian stock market depends largely on whether earnings growth remains strong,’ says Herald van der Linde, head of Asia Pacific stock strategy at HSBC. He called India’s earnings in the second quarter of 2024 ‘worrying’, with earnings growing at double-digits, but slower than in the past few years.

This can partly be blamed on seasonal factors (heatwaves, monsoon season) while an election that dragged on for months crimped consumption and investment. India’s GDP growth for the April to June quarter, which clocked 6.7% year-on-year, was also shy of Reserve Bank of India’s (7.1%) and market consensus (6.9%) projections.

Sandeep Bhatia, head of equity India at Macquarie Capital, doesn’t expect major earnings surprises for the next 12 to 15 months. No one is suggesting widespread selling of Indian stocks or funds. But geopolitical uncertainties are likely to trouble sentiment in the short to medium term and inflation needs careful managing. [SF]

BEST PERFORMING TRUSTS OF THE LAST 25 YEARS

Worldwide Healthcare Trust (WWH) 355p

It is no surprise that the Worldwide Healthcare Trust (WWH) has performed so well over the last quarter of a century.

There is likely more to come given the sector continues to benefit from the structural growth drivers of ageing global populations and accelerating innovation which is boosting drug discoveries.

The trust’s portfolio manager, OrbiMed Capital, is one of the largest dedicated healthcare investment firms in the world which has managed the portfolio since launch in 1995.

Since inception lead managers Trevor Polischuk and Sven Horho have delivered an annualised total return in net asset value of just over 14% a year, comfortably outperforming the MSCI World Healthcare index return of 10.5% a year.

The investment team have a global focus and attempt to identify sources of outperformance across the whole sector from the early-stage start-ups to large integrated biopharmaceutical companies.

The fundamental investment approach is designed to unearth opportunities in companies with underappreciated products, with high quality managements and solid financial resources.

The manager has assembled a basket of companies it believes are likely to benefit from increasing mergers and acquisitions activity which represents the portfolio’s largest holding, worth around 8% of assets.  

Weight-loss market leaders Eli Lilly (LLY:NYSE) and Novo Nordisk (NOVO-B:CPH) feature in the top 10 holdings. The trust has an ongoing charge of 0.9% a year. [MG]

Pacific Horizon Investment Trust (PHI) 569.7p

This Asia-focused fund has an enviable track record but, as it stands today, its large weightings towards India and China, accounting for more than 40% of the portfolio, make us unsure on its prospects of continuing to outperform in the future.

On a really long-term view performance is undoubtedly impressive but, more recently, the trust has found things more difficult. It is down 34.6% in total return terms on a three-year view.

While it dominates Asia in economic terms, China is something of an outlier in one important respect. Unlike many other developing economies in that part of the world, the country has a demographic profile more akin to the West. In other words, its population is getting older, its working age population is shrinking and this could act as an obstacle to growth. In part this is a legacy of China’s one-child policy which was in place from 1980 to 2016. China is also enduring a fairly painful transition from an export-driven economy to one powered by domestic consumption. Indian stocks, meanwhile, trade on very lofty valuations which, as discussed earlier in this feature, make us pretty nervous. [TS]

‹ Previous2024-09-19Next ›