Here are the best performing stocks of the FTSE 100 over the past 10 years

In the last ten years, the shares of the private stock company 3i Group (LSE:III) left the remainder FTSE 100 in the dust. The stock is up 773%.

That kind of performance over the long term is an indication of an unusually good business. And I think the company remains in a strong position going forward.

What is 3i Group?

The main difference between 3i and other private equity firms is that it does not raise external funds from investors. Since 2015, the company has invested only its own capital.

That may not seem like a big deal, but I think it’s hard to overstate how important it is. In my opinion, that is the main reason the stock has done so well over the past 10 years.

The challenge for private equity firms is that the payouts only appear when things look good. Investors want in on the action, but that’s where the bargains are hardest to find.

On the other hand, no one wants to invest in businesses when things are tough. But that’s exactly where firms with cash to spare can find the best opportunities to make a return.

By managing only its own currency, 3i avoids this problem. Not having outside investors to answer to means that the company can wait for opportunities and be ready when they arise.

This was not always the case – before 2015, the company operated with external funds. But looking at the company’s stock price before and after this point tells investors all they need to know.

Action (and inaction)

3i’s biggest investment – and its biggest success story – was in a company called Action. This is a discount retailer that operates in 12 different countries.

Long story short, 3i invested around £106m in Action in 2011. And since then it has repaid £2.9bn in dividends and valued its stake in the company at around £14bn.

There are a few things to be aware of. Another is that Action was taking on debt while paying dividends, so it wasn’t quite the money machine it might initially appear to be.

Another is that the company is not publicly traded, so its market value is slightly reduced. And 3i is accused of taking this into account on its balance sheet.

That is the important point. The action is more than half of the total assets of the FTSE 100 company, so potential investors should understand the reasons for that valuation and be comfortable with it.

These issues are important, but what is important is that 3i returns more than its initial investment each year. That means the investment was successful at any rate.

More of the same

Regardless of Action’s growth prospects, the 3i still has its own significant advantage. The ability to wait for the right opportunities sets it apart from other private companies.

That is why the stock has been the top performer of the FTSE 100 for the past 10 years. And I think it has every chance to continue to do well in the future.

I would like to take a closer look at the 3i’s action rating specifications. But below this, the stock is on my list of stocks to consider buying.