The FTSE100 continues to have an exceptionally good year. As I write, we are seeing an raise of 17% – a return on par with technology solutions S&P500 across the pond. At this rate, we may even cross the P10,000 price mark before the end of 2025!

But it’s not just the index that’s setting records. Many of its members have never been at a higher price.

People checking this box include:

Let’s enlarge one of them.

Quality operator

Halma is a product that reeks of quality. The occupational health and safety technology provider has been an excellent wealth builder over the years, benefiting from growth drivers such as increased regulation, an aging population and digitalization.

You can’t talk about this company without mentioning the passive income it generates for shareholders. Yes, a yield of just 0.72% right now doesn’t seem like much to get excited about. But here’s the thing: Halma has increased its annual dividend by 5% or more every year… for over forty years.

There are few companies that can boast such consistency, which shows how a strategy of building by acquisition (Halma is actually a collection of a huge number of smaller companies) can work wonders.

Analysts are forecasting another dividend hike this financial year.

And now the “bad” news…

The problem is that all the companies mentioned above are currently trading at high valuations. Any investor considering Halma would have to pay the equivalent of 34 times expected earnings. A diploma in a value-added distribution company has 31 times earnings. Mining, infrastructure and energy equipment supplier Weir Group has a price-to-earnings (P/E) ratio of 24.

The long-term average on the FTSE 100 index is in the low teens.

Sure, some companies are worth paying a premium to own. However, the higher they are, the greater the risk that the share prices of these companies will become detached from their fundamentals. This could be a problem if the current sentiment around AI starts to reverse, leading to a quick and brutal bear market (or worse).

In times of trouble, many investors sell everything they can to raise cash, regardless of quality. The general assumption is that exorbitant growth stocks tend to perform poorly. As evidence of this, it should be noted that all three stocks mentioned here have started to struggle with a spike in inflation in the wake of Covid-19. Within two years, Halma’s share price fell by over 40%.

As a side note, it’s worth noting that there haven’t been many director buys lately, at least compared to sales amount.

What direction will Halma’s share price go now?

Of course, there is no indication that the share price of the company with a capitalization of £14 billion will not continue to grow. In its last update (September), the company said that “strong progress” in the first half of the financial year, despite “challenging economic and geopolitical environment“. Low double-digit percentage revenue growth is now expected. This is an improvement over the previously expected upper single-digit percentage growth.

As a candidate for a long-term-oriented portfolio, I still think Halma deserves consideration. However, after rising over 30% so far in 2025, I wonder whether those who have already invested will need to temper their expectations for further gains in the near term.