Too many stocks roar into view with a spell of heroic performance, only to quickly prove themselves paper tigers. Your portfolio doesn’t need another over-hyped hero. It needs companies that can quietly deliver the goods year after year, with steady share price and dividend growth. Here are three unsung heroes to consider.
Bunzl Of Fun
The first time I looked at Bunzl (LSE: BNZL), almost three years ago, I took a shine to it. I declared it an unsung hero of the FTSE 100, a company that rolled up its sleeves and knuckled down to the unglamorous task of selling food packaging, cleaning supplies, catering and safety equipment to businesses around the world.Â
If anything, I underestimated the company. Bunzl’s share price is up a tasty 60% over three years, while the FTSE 100 as a whole returned a stale 1.69%. While stock markets have been rocked by everything from Grexit to Black Monday, Bunzl has been quietly doing its business. It is the perfect example of how long-term stock pickers can afford to ignore short-term macro shenanigans.
Bunzl may never grab the glory, but wise investors still set a high price on it. It was expensive three years ago, and is expensive today, trading at a pricey 20 times earnings and with a meagre 2% yield. But it has has amply justified that valuation. Healthy organic growth and an aggressive acquisition strategy helped wrap up first-half profit growth of 11%, with a steady 6.6% margin and 7% hike to the dividend. Bunzl still has plenty to sing about.
BT Or Not BT?
If BT Group (LSE: BT-A) is the answer, the question was the right one. BT has surprised everybody to challenge rival Sky on its home ground of Premier League and Champions League football rights, and rewarded loyal shareholders by growing 200% over the last five years, against just 9% on the FTSE 100.
BT is showing the scale of its televisual ambitions by launching AMC Networks in the UK, the channel behind critically praised dramas Mad Men and Breaking Bad. Once recent acquisition EE is integrated, it should become a major player in the growing quad-play market. Its plans to roll out super-fast fibre show a company that is aggressively expanding on every front, without quite attracting the glamour it merits, trading at a modest 13.44 times earnings. A strong balance sheet, healthy cash flow and 10-15% dividend growth suggest BT will keep singing.
Showing The Way
When I last looked at contract caterer Compass Group (LSE: CPG) I admired a strong, solid company whose clients included 90 of the Fortune 100. Management was bullish about the growth opportunities in global food and support services and rightly so, because the share price has headed north since then, rising is up 45% over the last three years.
My only quibble was that the stock traded at what I thought was a relatively pricey 18 times earnings, but today it is even pricier at 20 times earnings. Sometimes, it is worth paying a premium. Compass continues to point the right way, although the falling oil price has knocked demand from the Remote & Offshore oil and mining sector. Healthy Q3 organic growth of 5% and 7% in the US, allied to improving margins, suggest that Compass still has a strong sense of direction.