If there was one share to buy in 2019, it was sports retailer JD Sports (LSE: JD), which got upgraded to the FTSE 100 index from the FTSE 250 mid-year as its share price was on a smooth upward journey.
But it was already clear at the start of the year that this stock was poised to do well. I first wrote about it in January, convinced that it was one FTSE 250 stock worth buying immediately. From the time the article was published to now, the share price has risen by over 80%. The increase is even more impressive when compared to the same time last year, at 146%.
Full marks for confidence
Even now, there’s little denying that JD is a really good share to invest in. For me the one standout feature is its confident outlook, when so many other companies have been cautious and even outrightly pessimistic at a time of “macroeconomic uncertainty”, a term that has been used very widely over the year.
This is great news for the share moving forward. If the company was confident when the world around us was shrouded in questions, imagine what the future holds for it when we are actually moving towards clarity. It’s unsurprising that city analysts have a near unanimous ‘buy’ rating on the stock.
It’s a growth stock, make no mistake
It would look a lot like momentum investing to buy a share that’s been on the ascent through the year, but I would beg to differ. Momentum investing is relatively short-term in nature, motivated by price increases driven by news flow.
But JDS is essentially a growth stock, which means that it can be held for the long-term with the expectation of reaping solid capital returns. The two kinds of investing styles can overlap, of course. A growth stock can well see a price jump on a positive earnings announcement, for instance. And this is the kind of news that a momentum investor will typically respond to.
With this in mind, I think this is one share that still has a lot of steam in it. If we expect that 2020 will be a good year for the FTSE 100 (and by the looks of things, I am guessing it will be), then there’s little for JD to worry about barring any unexpected negative surprises that might show up. But these are typically outlier events, and on average we can expect good times ahead.
The only party spoiler here is the high price-to-earnings ratio (P/E) at 32 times. When I wrote about JDS earlier in the year, it was at 18 times and I thought it was expensive then, and it’s even more so now.
But I think its prospects are quite bright too. I still think it’s worth investing in at a staggered manner, accumulating it at every drop in price.