Making a million from investing is something not many people achieve. This is often because they set out to make those kind of returns over a short period, using a small amount of money. That’s why many invest in Bitcoin or gold instead of a FTSE 100 stock, and heavily leverage themselves on it. These kinds of assets have large volatility, but this can catch a lot of people out, dashing their dreams of making large returns.Â
But there are stocks that can generate large returns, which when compounded over the course of several years, can add up to making a million in the long run. I wouldn’t turn to Bitcoin or gold in order for me to achieve this, given the unpredictability of their performances. I’d rather analyse a FTSE 100 stock I believe in, and invest in the fundamentals. Flutter Entertainment (LSE: FLTR) is one good example.
Rallying despite the FTSE 100 slump
Flutter is a gambling operator that has well known brands such as Betfair and Paddy Power under the company umbrella.
The eye-catching reason Flutter is on my radar at the moment is due to the divergence in performance versus the FTSE 100 index and other stocks within it. Year to date, the FTSE 100 index is down roughly 25%. In comparison, Flutter is actually up around 3%! From the trough in the share price in the middle of March, it has rallied 76% in less than two months.
From the above, you can easily see how large returns from stocks are possible. But why have we seen such strong performance when the broader FTSE 100 index is down?
Recession-resistant?
The clear takeaway from investors is that they believe the imminent recession won’t unduly impact Flutter. If they thought it would, the share price would certainly be tracking the FTSE 100 index performance more closely (and be negative for this year). Evidence out so far does support this. The firm made a bold step of saying it wouldn’t be furloughing staff and it would pay them out of the company accounts. This shows that the firm has strong cash flows and retained funds in order to do this.
In a recent trading update, the firm did note that the cancellation of sporting events would negatively impact revenues going forward. Sports revenue at the firm is down 46%. This has been eased though due to the international scope of the business. Organic growth, along with mergers and acquisitions, have given it a worldwide presence. Given that horse racing is still going on in Australia and in the US, pressure has eased.
The worldwide operations of Flutter, the strong balance sheet, and the exciting future merger with Stars Group (opening the Canadian market), all make the stock a buy for me. Given that other investors agree with me (seen from the share price move), I don’t think that there’s much downside risk. The upside is even higher should the pandemic wilt away and sports betting resume here in the UK.