02 Feb 2 FTSE 100 stocks I’d keep forever
UK investors are spoilt for choice when it comes to picking stocks. Indeed, there are around 2,000 stocks of various sizes and sectors traded on the London Stock Exchange.
However, while there may be plenty of stocks to choose from, the percentage of companies that deserve a place in your portfolio is relatively small. According to some research, less than 10% of the firms currently in existence today will exist several decades from now. So, you do need to do your research to find the best long-term investments.
One company that I believe you can buy and forget is asset manager Schroders (LSE: SDR). Its whole business model is built on a multi-decade timeframe. The company manages assets for clients, the bulk of which are retirement funds and to handle these efficiently, you need to have a long-term outlook.
Luckily, Schroders has built a reputation of fiscal responsibility for itself over the past few decades, and as a result, investors are flocking to the group’s offering. Over the past six years, net profit has expanded at a rate of around 9% per annum as revenue has grown by more than a third. City analysts are expecting the firm to report earnings per share of 210p for 2017, up 110% from the 101p reported for 2012. It looks as if the company is well on its way to meeting these growth forecasts for the full year. In mid-October, it reported that for the first nine months of the year assets under administration grew 9% year-on-year to £430bn.
Unfortunately, Schroders’ success story isn’t a hidden secret, and the shares are relatively expensive, trading at a forward P/E of 16.7. Nonetheless, considering the group’s reputation and steady growth trajectory, I believe that this is a multiple worth paying. The shares also support a dividend yield of 3% covered twice by earnings per share.
Restoring its reputation
Another company that I believe has all the hallmarks of a great buy and forget investment is RSA Insurance (LSE: RSA).
During the past five years, RSA’s Fortunes have been mixed. Mistakes led the group to plunge into a loss for 2013, and a dramatic restructuring followed. After reporting a net profit of £429m for 2011, the firm slumped to a loss of £374m for 2013 and only earned £27m for 2016. This year, however, analysts expect the company to make a comeback with a net profit of £416m pencilled in, rising to £539m for 2018.
RSA’s business model has helped the company recover from its woes. Founded over 250 years ago, the general international insurer has a reputation among customers for long-term fiscal responsibility, and it needs to maintain this status as without it, customers seeking protection might go elsewhere.
Right now the stock is trading at a forward P/E of 12.1 and supports a dividend yield of 4.8%. The payout is covered 1.9 times by earnings per share, and as net profit recovers, during the next two years earnings per share are set to double.
Rupert Hargreaves owns no share mentioned. 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.