For me, Royal Mail (LSE:RMG) and TBC Bank (LSE:TBCG) are two great stocks to buy and hold this month and well into the future. Both have endured a tough few months and are now trading at a discount. But I think their long-term prospects make them excellent additions to my portfolio.
TBC Bank
TBC Bank is Georgia’s largest private financial organisation. The Tbilisi-based bank operates in Georgia, Azerbaijan, Uzbekistan and Israel.
TBC’s share price collapsed earlier this year after Russia invaded Ukraine. The event raised concerns about Georgian security (two regions of Georgia have been occupied by the Russian military for near 15 years) and its economic growth. The stock’s valuation is heavily linked with the growth in its domestic market. Last year, the country’s economy grew by 14.6%, while average real GDP growth was equal to 16.3% over the year.
However, like the Bank of Georgia, TBC has also recently released positive company data. TBC Bank said annual profit more than doubled in 2021, driven by strong income and a recovery in the Georgian economy. Pre-tax profit for the 12 months to December 31 rose to £226m, massively up from 2020.
The bank noted that the Georgian banking business will remain its core strategy, but highlighted the upside of its Uzbek business. “The Uzbek market should give us a competitive edge by providing a material contribution to our growth and diversification over the years to come,” the company said in a statement.
Despite a recent jump, this stock is still trading at a 30% discount versus three months ago. I’ll be buying some for my portfolio.
Royal Mail
Last week, Liberum downgraded its stance on Royal Mail to “sell” from “hold“, exacerbating the share’s fall over the last year. At the time of writing, the British postal service is currently trading at 325p a share, down from from highs of over 600p last summer.
Despite Liberum’s downgrade, I think Royal Mail Group looks like a good addition to buy portfolio, offering long-term growth potential. One reason for this is the firm’s transition to being a parcels-focused business, which has greater margins than just letters. The pandemic helped Royal Mail in this transition as demand for sending parcels soared.
Moreover, Royal Mail has also pushed forward with the automation of its sorting operations. Just a few years ago, nearly all parcels were being sorted by hand. Nowadays, that figure is around 50%, marking a considerable shift away from costly, labour-intensive manual processing. Coupled with the massive increase in parcel numbers, the group should be able to transform its revenue in the future.
One issue that could certainly hurt profits in the near term is inflation, notably the impact of rising wages. Salaries represent a considerable proportion of the company’s costs.
Buying today, I could expect a a dividend of 3%. That’s certainly not world-beating. But it’s the growth that interests me. The company’s price-to-earnings ratio is just 6.3. I’ll be adding this stock to my portfolio.
