If you are a stock-picker, there are times when you want a share for the really long haul. You might be in your 30s or 40s, looking for an investment that will deliver handsomely by the time you reach retirement, or you might be older and looking for a share to give your children or grandchildren to help secure their future. It’s difficult to imagine what the world will look like in 20 years’ time, but analysts say there are nevertheless certain themes that you can bank on.
We asked experts at three stockbrokers to tip companies that should deliver over this timescale, including established giants that they believe have staying power and some higher-risk punts.
Reckitt Benckiser
The Anglo-Dutch consumer goods giant owns brands such as Dettol, Vanish, Durex and Nurofen. Graham Spooner, of The Share Centre, says: “These are everyday necessities in developed markets and sales remain steady through the economic cycle. This results in relatively steady earnings and cash flow.
“We like the share’s defensive characteristics. It has been a good performer over the past 14 years, with consistent outperformance. The company has been criticised for having limited emerging markets exposure, but management took this on board and a drive into the higher growth regions is paying dividends. The stock represents a good buying opportunity for the long term in a business heading in the right direction.”
Prudential
Prudential was founded in Hatton Garden in 1848, providing insurance and other financial products when the middle classes were seeking financial security amid Chartist unrest at home and revolutions in Europe. Today it’s one of the world’s biggest insurers and financial services groups, with its biggest division in Asia. Keith Bowman, of Hargreaves Lansdown, says: “The company provides exposure to three large, long-term, growing markets; meeting demand for savings and protection products from the new middle classes in Asia and the savings and retirement needs of baby-boomers in the US and the ageing population in the UK.
“Prudential pursues a progressive dividend policy [where dividends increase as a percentage of profit] and management is targeting the generation of at least £10 billion of cash across the group from 2014 to the end of 2017. Consensus analyst opinion currently points to a strong buy.”
WPP
The London-headquartered advertising and PR giant owns iconic names such as Young & Rubicam and employs more than 179,000 staff worldwide, doing business in 110 countries. Mr Bowman says: “The group is continuing to make selective acquisitions, focusing on new media and data investment management. It recently bought a leading social media agency in China. In its half-year results, WPP reported revenue growth across all its regions and sectors, and increased its share buyback programme. Again, in all, a strong buy.”
Randgold Resources
This gold miner has its principal operations in Mali. The significant unrest in the region has impacted on confidence in the share price, but the workings on the ground remain largely unaffected.
Mr Spooner says: “We like the company as it maintains an aggressive exploration programme and has a relatively good success rate in turning exploration projects into working productive mines. Also, the quality of the ore being mined is improving and reserves at new sites are being upgraded. The Kibali project in Congo has so far surpassed expectations by most measures and could potentially be one of the largest gold mines in Africa. We rate this as buy for investors willing to take on a high level of risk for a play on gold.”
Regus
Regus provides flexible, serviced office space in around 1,800 business centres worldwide. Mr Spooner says: “We recommend this stock due to its long-term growth prospects. Despite the relative weaknesses in the global economic environment, the demand for Regus’s services is rapidly increasing due to the structural shift in the modern corporate world for flexible and mobile work solutions. Investors should benefit from its geographical spread as the company currently operates in more than 100 countries and is continuing to expand into different regions. There may also be the opportunity for international acquisitions.
He adds: “This is a stock for investors seeking capital growth who are willing to accept a higher level of risk. It trades at 18 times earnings in line with the sector and pays a reasonable dividend.”
Nike
Nike, based in Oregon, is one of the world’s largest sporting companies, in the business of the design, development and worldwide marketing and sale of footwear, apparel and equipment that’s used by high-profile sports stars including the Russian tennis player Maria Sharapova.
Nicolas Ziegelasch, of Killik & Co, says: “Nike sells its products to major retail chains, through Nike-owned retail and online stores and a mix of independent distributors and licensees in approximately 190 countries. We are positive on the sporting goods sector globally as consumers increasingly shift to a more healthy lifestyle, driven by increased income level. We think Nike offers the best way to play this theme, given the strength of the brand, the company’s track record of innovative new products and the margin potential from the continued shift to direct sales.”
Google
The US tech giant is the world leader in online search and online advertising, with proprietary technology to match users’ search enquiries to advertisers’ keywords; most of its revenues are made from advertising.
Nevertheless, Mr Ziegelasch says: “In recent years, Google has been investing in new products areas, with the Android smartphone operating system being the runaway success. We believe that Google will increasingly capitalise on Android’s success by taking back more control and pushing smartphone manufacturers to ensure a better experience and offer more standard Google apps, on which Google earns revenue. In addition, Google is moving to capture the next emerging generation of smartphone owners with the Android One project, aimed at selling Android phones for under $100 in India.”
HSBC
The old Anglo-Chinese bank is today the world’s second largest by assets. Mr Ziegelasch says: “It is also one of the few truly global banks that’s able to act on both sides of trade flows, with a very strong position in Asia. With the post-financial crisis clean-up largely complete, we believe that HSBC is in good shape to benefit from a more normalised world. It has very strong deposit funding, especially in Hong Kong, and this makes it positively geared to gradually rising rates as well as the ability to take advantage of any pick up in lending demand. While growth is not expected to be spectacular, it has an attractive dividend yield of around 5 per cent.”
