Stocks for the Long Run: BT Group vs. the FTSE 100

LONDON -- If the long-run return on the market is 9.4% (as researchers at Credit Suisse say), investing in shares should be a no-brainer. Somehow, however, all too often our portfolios don't seem to reflect that attractive performance.

This is partly because that 9.4% number is an average derived from 100 years of data. Picking various time periods within that 100 years gives very different outcomes -- and the market almost never actually returns 9.4% in any single year.

Needless to say, unless you're holding a market tracker, your portfolio could have dramatically different results to what the market experiences. If you own a disproportionate amount of winning shares, your returns could be significantly better than the market. On the other hand...

In this series of articles, I'm looking at how individual shares have performed against the FTSE 100 during the past 10 years. Today, I'm assessing fixed-line telecom provider BT Group (LSE: BT-A  ) (NYSE: BT  ) .

Over the last decade, BT Group's performance has failed to match that of the FTSE 100, despite a strong recovery from the depths of 2009.

Source: S&P Capital IQ.

Since November 2002, BT Group's shares have had a rather pedestrian average annual return of 5.9% -- unable to achieve the FTSE 100's 7.4% annual average (these return calculations assume dividends were reinvested).

While BT has the incumbent position in fixed-line communications (from back in the day when phones had wires attached to them), the migration to mobile communications as well as rising competition has resulted in three consecutive years of revenue declines – and management expects fiscal 2013 to add to this count. 

Despite these less-than-inspiring characteristics, investors need to look to the future. Over the past several years, cost-cutting exercises have helped improve profitability and the demand for faster connectivity speeds has spurred growth in subscribers. The company's forward P/E of 9 looks rather undemanding and the 15% increase in the interim dividend would seem to say management sees a brighter future ahead.

So is BT a struggling giant who has seen its day? Or does the move to wider use of broadband connections and fiber-optic cables offer the company a chance to revive itself and reverse the underperformance of the last decade? Only time will tell.

Large caps for the long run
If you already own BT Group, you may also wish to consider the eight large caps spotlighted in "Super-Investor Neil Woodford's Favorite Blue Chips" for your portfolio. You see, this exclusive Fool report evaluates the FTSE shares the legendary index-trouncing investor is backing today, and the investing logic behind them.

You can read all about the potential long-run winners Woodford currently favors by clicking here to download the exclusive report today -- it's free!

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