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2021 has been largely a good year for FTSE 100 stocks. But there are some stocks, as always, that have performed better than others. Among the best-performing of these are two stocks I have written about a fair bit in the recent past. One is the warehousing real estate investment trust (REIT) Segro (LSE: SGRO) and the other is letters and parcels delivery specialist Royal Mail (LSE: RMG). Both have seen over 40% increases in their share prices this year.
The e-commerce boom
This should be no surprise. E-commerce-related stocks have done well in recent times. Thanks to lockdowns, many more people have discovered the wonders of online shopping. And the e-shopping experience has evolved over the last couple of years to meet the fast-growing demand seen during the pandemic. Analysts have said the shift towards online buying and selling, which was already happening, was speeded up because of the unusual situation we found ourselves in. So prospects for stocks in the industry might just have improved for good.
Cheaper compared to other FTSE 100 stocks
As a result, I think that even after the pandemic is over, both Segro and Royal Mail stocks could continue to grow. They might not grow at as fast a clip as we have seen recently, but they could keep rising nevertheless. And this is particularly so considering how low their prices still are relative to other FTSE 100 index firms.
Segro, for instance, has a price-to-earnings (P/E) ratio of only seven, while Royal Mail’s is six. This compares to the P/E for the FTSE 100 index of almost 18. In other words, compared to the average stock in the index, these two are far more affordable. Admittedly, with Segro there is the question of whether a REIT’s price should even be measured using the P/E. But it does give me a comparison against other FTSE 100 stocks, for lack of an alternative. And even if I ignore the valuation measure for Segro, that still leaves me with Royal Mail, which is glaringly cheap as well.
Their dividends
I like that the stocks pay dividends. Royal Mail stands out in this case as well. It has a dividend yield of almost 3.3%, which is close to the average FTSE 100 yield of 3.5%. Segro’s yield is much lower at 1.3%. But I think this could be because of the steady rise in its share price over time. In any case, it still stands out as a growth stock for me to buy.
What I’d do
I bought Royal Mail recently, and it has already been a rewarding stock for me to hold. And Segro has been on my investing wishlist for some time. I am braced for potentially smaller gains from both stocks in the next year, as the pandemic moderates further and people can step out even more freely than before. But I think their real potential will be realised over the next decade when online shopping becomes an even bigger phenomenon than it is today.
Manika Premsingh owns Royal Mail. The Motley Fool UK has no position in any of the shares mentioned. 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.
