2 stocks I’d invest £1,000 in for the next decade

These two companies could offer growth at a reasonable price.

| 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.

It’s been a difficult few years for the resources industry. Falling commodity prices have caused profitability to come under pressure across the sector. This has caused investor sentiment to decline, which has left many companies in the industry with significantly lower share prices.

However, the prospects for a number of commodities now seem to be improving. After growth in recent months, there could be the potential for even higher prices over the medium term. As such, now could be the right time to buy resources shares. With that in mind, here are two stocks that could deliver high returns in the long run.

Improving outlook

Reporting on Tuesday was oil and gas company Faroe Petroleum (LSE: FPM). Its production in 2017 averaged 14,300 bopd (barrels of oil per day), which is at the upper end of guidance. Its production for 2018 is expected to be between 12,000 and 15,000 bopd. In 2017, it delivered an increase in 2P (proved plus probable) reserves to 97.7 mmboe following the successful Brasse appraisal well. This means that its 2P reserves are up 20% to record levels.

Looking ahead, the company appears to have a bright future. The oil price has already pushed past $70 per barrel and could deliver further growth in the next year. There could be a demand deficit in future months, with there being the potential for continued cuts to supply from OPEC nations. This means that the company’s financial performance could improve substantially.

In fact, Faroe Petroleum is expected to report its first profit since 2013 this year. Next year it is due to record a rise in its bottom line of around 254%. This puts it on a forward price-to-earnings (P/E) ratio of around 11, which suggests that it offers a wide margin of safety. This indicates that now could be the right time to buy it.

Stronger business

Also offering upside potential within the resources industry is Glencore (LSE: GLEN). The company is finally expected to put the difficulties of recent years behind it, with it forecast to return to profitability in the current year. This in itself could have a positive impact on investor sentiment and its share price, since investors are likely to have priced in a degree of uncertainty regarding its financial performance.

Looking ahead to next year, Glencore is forecast to post a rise in earnings of 18%. This would represent a solid result in what may prove to be uncertain times for commodity prices. And while its performance is directly linked to commodity prices, investors also seem to have priced in some level of risk in this area. The stock’s price-to-earnings growth (PEG) ratio of 0.6 suggests that it could offer high returns, while its downside risks may be relatively low.

With Glencore having a diverse business model and a stronger balance sheet following a period of self-help initiatives, it could be a strong performer in the long run.

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.

Peter Stephens has no position in any shares 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.

More on Investing Articles

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

Is now a good time to start investing in the stock market?

Predicting what the stock market will do in the next few weeks and months is nearly impossible. But over the…

Read more »

Close-up as a woman counts out modern British banknotes.
Investing Articles

£5,000 invested in Legal & General shares 10 years ago would have generated passive income of…

Legal & General shares are one of the highest-yielding in the FTSE 100. How much passive income could have been…

Read more »

Passive income text with pin graph chart on business table
Dividend Shares

3 world-class dividend stocks to consider for passive income

These three stocks could potentially help investors create a stable – and growing – stream of passive income in the…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

Diageo’s share price plunges 43% in 2 years! Time to consider buying the dip?

With sales falling, the Diageo share price is being hit hard. But with the shares now trading near 52-week lows,…

Read more »

Night Takeoff Of The American Space Shuttle
Investing Articles

The GGP share price skyrockets 100%+ in 2025 – Could this be the breakout stock of the year?

With the GGP share price more than doubling in four months, can Greatland Gold continue to thrive throughout the rest…

Read more »

Illustration of flames over a black background
Investing Articles

JD Sports’ share price soars 27% in just 3 weeks – is this the hottest stock to consider buying now?

The JD Sports share price is rising rapidly as management steers the business back on track. Can this upward momentum…

Read more »

Nottingham Giltbrook Exterior
Investing Articles

The Marks and Spencer share price stumbles on a cyberattack! Is it time to panic?

A disruptive cybersecurity breach has brought down Marks & Spencer’s online store, sending the share price tumbling. Should investors be…

Read more »

piggy bank, searching with binoculars
Investing Articles

Down 32%, this FTSE stock now has a 12% dividend yield!

With one of the highest yields in the FTSE 350, is this emerging markets investment firm a screaming passive income…

Read more »