2 stocks I’d buy and hold forever

Why these two stocks could be great buys for long-term investors.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Investors are spoilt for choice when it comes to FTSE 100 property stocks. Whether you’re looking for exposure to commercial real estate or private housing, there’s an abundance of options. Land Securities, British Land and Persimmon are just three to consider.

However, if I had to pick two property stocks to buy and hold forever, they wouldn’t be familiar FTSE 100 names. Indeed, you may never have heard of my two picks. This is not because they’re tiny little companies — one has a market cap of over £1bn and the other is £480m — but more because they issue only absolutely essential RNSs and eschew paying brokers to publish ‘research notes’ and other PR puffery.

Instead, these two companies, which are family-controlled, go quietly about their task of increasing the value of shareholders’ equity, paying dividends and managing the businesses through economic cycles. They’ve been doing it successfully for decades. In fact, I’d say their pedigrees are such that they can be more rightly described as ‘blue-chip’ than some FTSE 100 firms.

Big discount

Daejan (LSE: DJAN) shares are up over 3% at around £64 after the company released its annual results today. These showed its total portfolio of commercial, industrial and residential properties valued at £2.26bn, up from £2.01bn last year. Its UK portfolio accounted for £1.66bn of the valuation and its US eastern seaboard portfolio accounted for £0.6bn.

Meanwhile, equity shareholders’ funds at the year-end stood at £101.61 a share, so the shares are currently trading at a 37% discount. This gives a wide margin of safety for investors looking to buy a slice of this business for the long term.

The company announced a 5.4% increase in the full-year dividend to 98p a share, supported by net cash from operating activities (rental income, less costs, interest and tax) of 116.5p. The current yield isn’t high at 1.5% but with the company conservatively-run to avoid boom-and-bust (the dividend was maintained through the financial crisis), investors could be enjoying a very nice income in 10, 20, 30 years’ time.

Hidden value

Long-term thinking is also the name of the game with Mountview Estates (LSE: MTVW), which reported its annual results last month.

The company buys residential properties with regulated and life tenancies at a discount to notional vacant-possession value and sells them years, or decades, later when they become vacant. Thus, it profits from both the long-term rise in the value of the property and the vacant-possession premium.

Mountview reported equity shareholders’ funds at its latest year-end of £86.25 a share. With the shares currently trading at £118 they appear expensive at first sight. However, there is hidden value in the property. This is because its residential properties are held on the books “at the lower of cost and estimated net realisable value.”

One analysis of the true value of the properties would imply equity shareholders’ funds of over £200 a share, putting the shares at a 41% discount.

On the dividend front, Mountview announced an unchanged payout of 300p a share for its latest year, supported by net cash from operating activities of 575p. The lack of an increase in the dividend is somewhat disappointing, but it does follow increases of 9% last year and 37.5% the year before. Also, the running yield of 2.5% is a decent starting point for a long-term investor.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

G A Chester has no position in any shares mentioned. The Motley Fool UK owns shares of Mountview Estates. 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.

More on Investing Articles

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »