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In some methods, it feels illogical to match the FTSE 100 to the S&P 500. The components that have an effect on markets domestically and overseas differ significantly. Whereas the US is saturated with fast-moving tech hatchlings, the UK is weighed down by centuries-old monetary dinosaurs.
Investor habits differ too. The British exhibit a bent in the direction of slow-and-steady earnings investing, whereas the US is legendary for its high-growth shares. That is mirrored within the common dividend yield — 3.5% right here vs 1.3% throughout the pond.
However there are some areas the place the 2 markets overlap. The truth is, virtually 75% of corporations listed on the Footise really obtain their income in {dollars} however report earnings in sterling. Presumably, they’ve discovered this fashion of working most helpful.
So what shares get the very best of each worlds? I believe I’ve discovered one.
3i Group
3i Group (LSE: III) is a London-based non-public fairness and enterprise capital firm on the FTSE 100. Most of its holdings are in non-public fairness similar to European non-food retailer Motion and US journey know-how firm Arrivia. It additionally has its personal infrastructure arm specializing in transport, logistics and utilities corporations in Europe and America.
Except for Motion, lots of its holdings don’t seem like well-known corporations. Nonetheless, its efficiency speaks for itself. The value is up 56% prior to now 12 months and 177% over 5 years. That’s greater than double the S&P 500 and 20 occasions the FTSE 100. It’s additionally outperformed some main US shares like Berkshire Hathaway and Amazon.
As such, it acts extra like a US development share than most UK listings. It additionally advantages from investments which can be diversified throughout a number of areas.
Valuation
Utilizing a reduced money stream mannequin, analysts estimate the shares to be undervalued by greater than 60%. And with earnings growing quicker than the share value, its price-to-earnings development (PEG) ratio’s solely 0.7. So it appears undervalued.
Nonetheless, with funds like 3i, the value might not precisely replicate the underlying worth of the property. This could make the valuation much less dependable than regular shares so it’s essential to additionally consider the fund’s holdings.
Dangers
Non-public fairness is inherently much less clear and liquid than publicly traded shares. This could make it more durable to worth and requires extra belief within the fund managers.
Since 3i Group has an 80% stake in Motion, any points with the retailer might harm its share value. This additionally will increase its publicity to dangers within the European retail sector.
So whereas it has a promising observe file, there’s no assure it will proceed. Relying on their funding technique and danger urge for food, some traders might choose deciding on particular person shares they’ll assess themselves.
An extended-term consideration
There’s a variety of nice worth in each the S&P 500 and the FTSE 100. Each supply distinctive worth propositions that attraction to totally different traders.
3i Group is only one instance of a FTSE inventory that displays US-style development mixed with the steadiness typical of European shares. It’s the form of inventory I’d really feel glad to put money into for the long run, so I plan to purchase the shares subsequent month.
