Stock market

72% increase in profits in one year and one decade! Is this my best UK stock?

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I never thought there could be such a thing as the perfect UK stock. Of course there are many things I appreciate. One or two I am quite devoted too. But perfection? This is a big question. Every stock has its own risks. No company counts it forever. Still one FTSE 100 The stock comes very close.

Private equity specialist Intermediate Capital Group (LSE: ICG) flies under the radar. I have never seen it appear in the top 10 most traded companies. Search engine traffic is relatively light. My fellow fools rarely explore its mysteries. The first time I met him on December 13, 2022, I was shocked.

I said about it “Unacceptable 6.45% yield”A strong balance sheet with £1.3bn of liquidity, and the ability to raise £6bn of funds every six months.

A top FTSE 100 opportunity

With a valuation of just 6.4 times earnings, I have offered it. “Strong potential for share price appreciation as well”. And how right I was. At the time, its shares were trading at 1,150p. I promised to buy them after Christmas but stupidly didn’t. Today, I have to pay 2,394p. That’s more than double. Over the course of a year, they gained 71.98 per cent against the overall index’s rise of 10.54 per cent.

Now I’ve got one more thing to like about stocks. I was looking at the top 10 holdings. SPDR S&P UK Dividend Aristocrats UCITS ETF And there it was, right up there.

The ETF tracks UK companies whose dividends have grown for at least seven consecutive years, making ICG a true dividend elite. In fact, its track record of dividend growth goes back more than a decade.

Sadly, I had to appreciate the virtues of Intermediate Capital Group from afar. I will also admit that no part is perfect. Private equity returns can be lumpy, depending on the purchase and disposition. Its share price has risen over the long term but with plenty of peaks and troughs along the way. Today it is on the rise. A trough can easily follow.

Income Hero

As a global alternative asset manager, its mission is to provide capital to growing businesses. By rights, it should be tough, with interest rates expected to remain high for a long time. I keep reading that private equity is headed for a tough time, but Intermediate Capital Group has bucked the trend so far.

On Tuesday, it reported a 132 per cent rise in pre-tax group profits to £258.1m. Performance fee income increased by 276% to £73.7m. And yet one “difficult environment”With buyout volumes falling for the second year in a row. Fundraising is well under way though.

So should I buy it today? Despite all these dividend increases, the trailing yield at 3.38% isn’t high. Although it covers 2.1 times well. Inevitably, the stock isn’t as cheap as it was in December 2022, trading at 14.32 times earnings. That still seems like a good price to me.

As a rule, I hate buying stocks after a strong run, because I feel like I’ve missed out on the best bits. But rules are made to be broken. I need this in my portfolio. It may not be perfect, but I still think it’s an incredible buy.

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