The Quiet Achievers: UK Stocks Thriving in the Shadows

Plastic spoons and PPE might not be the most exciting industries, but Bunzl, the distributor of these essential products, is proving that "boring" can be beautiful. The company, known for its steady returns and lack of headline-grabbing news, defied its nickname this week by increasing profit guidance and announcing £250 million in share buybacks. This announcement sent shares soaring to a record high, demonstrating the enduring appeal of consistent performance.

Bunzl is a member of the Financial Times' "XFT" index, a collection of FTSE 100 companies that consistently deliver strong returns without the usual fanfare. Launched in 2017, the index has been updated to include 27 companies, all of which have received minimal attention in the Financial Times over the past year. New entrants include engineering firms Weir Group and IMI.

Bunzl’s impressive performance reinforces the index's original thesis: sometimes, a lack of media buzz can actually be a good thing. The company has consistently delivered strong returns, particularly benefiting from the pandemic's impact. Revenue has remained robust, only slightly below its 2022 peak of £12 billion, and operating margins have improved significantly, reaching close to 8% thanks to US acquisitions.

The revamped XFT index demonstrates a clear preference for steady growth and consistent performance. 3i, a private equity firm, topped the list with a remarkable 250% return over five years, largely driven by the success of its Dutch discount retailer Action. Diploma, a supplier of technical components, followed closely, achieving a 205% return through its focus on organic growth and strategic acquisitions.

Other long-term XFT members, including software giant Sage and information services provider Relx, also made the top 10 performers. While some companies, like Premier Inn owner Whitbread, saw negative returns over the period, the overall performance of the XFT index outstripped the wider FTSE 100. The index rose 82% over the past five years, compared to the FTSE 100's 41% gain.

These results suggest that the XFT index's focus on companies with a low media profile and a track record of consistent returns is a winning strategy. In a world obsessed with the next big thing, it seems that "boring" can sometimes be the most rewarding.