These big-cap shares could double over the next three years.
Growth investment legend Jim Slater famously said that "elephants don't gallop and fleas can jump 200 times their own height", when explaining his preference for investing in smaller companies.
He's right about the fleas, of course, but when it comes to elephants, I disagree.
The last few years have seen no fewer than 19 elephants galloping up the FTSE 100 (UKX) and growing by more than 100%. Four of these giants have grown by more than 250%!
If you're trying to build a million-pound retirement portfolio, gains like this can make a big difference -- and identifying these big cap multibaggers is also a subject that's covered in this free Fool report, "Ten Steps To Making A Million In The Market", which I strongly recommend.
Let's take a look at FTSE 100 shares that have grown by more than 110% over the last three years:
|Company||Three-year growth||Market cap||Current yield|
|ARM Holdings (LSE: ARM)||365%||£6,935m||0.69%|
|Croda International (LSE: CRDA)||322%||£3,162m||2.43%|
|Aggreko (LSE: AGK)||297%||£5,977m||0.93%|
|Burberry Group (LSE: BRBY)||254%||£6,010m||1.82%|
|Weir Group (LSE: WEIR)||173%||£3,023m||2.32%|
|IMI (LSE: IMI)||157%||£2,791m||3.45%|
|Intertek Group (LSE: ITRK)||154%||£4,288m||1.26%|
|Rolls-Royce Holdings (LSE: RR)||150%||£15,652m||2.09%|
|Petrofac Ltd. (LSE: PFC)||145%||£5,219m||2.45%|
|InterContinental Hotels Group (LSE: IHG)||128%||£4,400m||3.64%|
|Meggit (LSE: MGGT)||126%||£2,940m||2.79%|
|Shire (LSE: SHP)||125%||£10,558m||0.52%|
|Fresnillo (LSE: FRES)||120%||£10,248m||4.63%|
|BT Group (LSE: BT-A)||118%||£16,521m||3.92%|
|Hargreaves Lansdown (LSE: HL)||117%||£2,250m||2.72%|
|FTSE 100 average||23%||£15,100m||3.8%|
Unsurprisingly, our big growers are mostly below average in terms of market cap and yield -- this kind of growth implies heavy inward investment and high price-to-earnings (P/E) multiples, all of which depress the current dividend yield.
However, it's worth noting that anyone who got in on these shares three years ago is probably enjoying very attractive yields, thanks to the wonders of yield on cost appreciation.
Admittedly, some of these companies were in the FTSE 250 three years ago, but many weren't and are good companies that have recovered from a bad spell -- like BT and Rolls Royce.
The attraction of companies like these is their lower risk -- two out of three of my selections pay attractive dividends and all three of them offer a combination of size, brand and assets that should ensure their survival.
The credentials of Aviva (LSE: AV) as a value investment have been well covered in these pages. Its current 9.8% yield makes no sense in the long term, and the business is due for a re-rating.
Lloyds Banking Group
Like Royal Bank of Scotland Group (LSE: RBS), Lloyds Banking Group (LSE: LLOY) is trading at approximately a 50% discount to its net asset value.
It appears to be on course to return to profit this year and, assuming we avoid a eurozone meltdown, I reckon that it won't take more than a few years of half-decent profits for Lloyds' market cap to get close to its book value -- which would double its share price.
Although BP (LSE: BP) already has a mighty market capitalisation of £79bn, it has a P/E of just 4.8 -- effectively placing it at a 50% discount to Royal Dutch Shell (LSE: RDSB), which sits on a P/E of 7.2.
I suspect that BP will sort out its current Russian and American issues soon, and will also acquire some decent new producing assets over the next year or two. This could pave the way for a substantial growth in share price that would place it level with its British peer.
Over to you
These three companies have all fallen on hard times in one way or another and are essentially recovery plays. I believe they offer good potential growth, but there's no doubt that if you are prepared to take the risk of investing in smaller FTSE Small Cap and FTSE 250 companies, much greater growth levels are possible.
Finally, for some more share ideas from the Fool's own in-house team of analysts, I would recommend you check out this free report, "Top Sectors Of 2012". I found some interesting share tips in it, and I'm confident you will find it worth reading.
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Further investment opportunities:
> Roland owns shares in Aviva and Royal Dutch Shell but does not own any of the other shares mentioned in this article. The Motley Fool owns shares in Hargreaves Lansdown.