There is something sweet about the idea of doubling my money in a relatively short time period. And it gets sweeter when I realise that more than one FTSE 100 stock could do this for me. That, of course, is only if I choose wisely. For instance 3i Group (LSE: III), which has shown pretty good performance over time, and is one that I could invest £1,000 in now.
3i share price has doubled in 5 years
Five years ago, the stock was trading at a price of around 700p. Cut to today, and it has almost doubled to 1,354p as I write this Friday afternoon, almost double of where it was then. And this is after it saw a fall late in February. If that stock market wobble had not happened, it could have stayed at more than double that level.
But just because the investment company has done well in the past, does not mean that it can continue to do so. To figure out if it has the potential to, however, I took a look at its recent numbers. Most recently, the company provided a portfolio update, which showed some healthy developments.
Recent developments are encouraging for the FTSE 100 stock
First, its investment in Action appears to be doing well. Action is a European non-food discount retail chain, which saw a robust 23% sales increase in 2021 compared to the year before. Its earnings, as measured by the number before interest, taxes, depreciation and amortisation, showed even higher growth of 36%. Considering that it is 3i’s single biggest investment, the rise is encouraging.
Next, in general, its private equity portfolio has shown good results. A review of its portfolio companies reveals “strong momentum”. This is attributed to post-pandemic improvements and quite likely driven to an appreciable extent by Action’s performance.
Finally, it talks about a non-negative in the context of Russia and Ukraine, as it has no exposure to either country. I do think, however, that it will still feel the indirect heat from the war because of its implications for inflation.
Risks if I invest £1,000 in it
The countries are produce commodities, whose prices were rising anyway. In the UK, inflation in February reached a high of 6.2%, which is far in excess of the Bank of England’s target rate of 2%. And we can brace for higher prices now. The Office of Budget Responsibility now expects inflation to touch 8.7% by the last quarter of the year. In fact, 3i itself mentions that “inflation and supply chain issues will be the focus this year”. This is because its portfolio companies are looking to address the challenge.
Still, it is possible that it will be impacted less than, say, a company that directly has to bear the squeeze from higher costs and lower consumer demand because real incomes start falling. And its latest report gives me reason to feel encouraged that its share price performance can be sustained. Analysts’ share price targets look encouraging too. I am pretty positive I want to invest £1,000 in the stock.
