I am always on the lookout for FTSE 100 shares that offer a mix of safety and growth potential. When I look at the performance of companies in the index, two shares stand out for their sustained returns. Croda International (LSE: CRDA) and Intermediate Capital Group (LSE: ICP) are the shares I am focusing on today.
The primary reason I think they are overlooked is that they operate in sectors that are generally considered ‘boring’. But when I look at returns over the last five years, they rank among the top 10 in the index. Both companies have excelled over the short, medium, and long term and I think they are top picks for my portfolio today. Here’s why.
Chemical powerhouse
British company Croda International has established itself as a top chemical manufacturer and supplier across many industries. It has a strong global presence and recently acquired its first manufacturing site in China. Croda also has 10 manufacturing sites in Europe, the Middle East, and Africa, and three in North America. This strong foothold has allowed the company to focus on a variety of businesses including adhesives, polymers, pharmaceuticals, and dietary supplements.
Despite Croda shares growing a whopping 59.5% last year, I still think there is room for growth. This is because of the impressive half-yearly (H1) 2021 results the company posted. Operating profits went up 42% to £218.5m (£154m in H1 2020) driven by a 39% growth in sales. Croda shares are currently trading at 9,880p, very close to its all-time high of 9,920p.
However, overvaluation is a concern. Croda shares are trading at a forward profit-to-earnings ratio of 54 times, which is well over the FTSE 100 average. Also, analysts predict significant expenditures for Croda due to new UN environmental sustainability standards to be met by 2030. Changes in the manufacturing chain and increased focus on R&D could increase operating costs significantly, which could cut down revenue growth.
But Croda is one company I would invest in at any given time, factoring in its strong sustained returns in the market. I am watching this FTSE 100 share closely to capitalise on any small dip in share price.
Global asset manager
Intermediate Capital Group’s recent surge in the market has been spectacular. One-year returns stand at 50% and returns over a five-year period stand at a whopping 238.3%, making it one of the top performers in the FTSE 100 index over the medium term.
Its shares are currently trading at their all-time high price of 2,360p. But, the company still looks undervalued when factoring in recent earnings. Its profit-to-earnings ratio of 15 times and steady revenue stream tell me there is room for growth.
ICP manages $68.9bn in total assets. According to FY2021 (ending 30 September 2021) results, profit before tax was £509.5m (2020: £114.5m) with earnings per share of 162.3p. Fees from fund management was £333.7m. This is a huge plus because businesses don’t often switch asset managers. Also, the company announced a 56p dividend, up 10% from the previous year bringing yield at the current share price to 2.3%.
However, I don’t think global economies are still clear of turbulence. An event like a market crash could see businesses pull investments to generate liquidity, which could affect ICP’s earnings. But, I think the company has been posting strong results and returns. I would definitely consider a £1,000 investment in this FTSE 100 company today.
Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Croda International. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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