I think these two FTSE 350 value stocks could deliver mighty returns over the next decade. Here’s why I’m considering adding more of them to my UK shares portfolio.
Spire Healthcare
Private healthcare providers are benefitting from elevated NHS waiting times as people pay for treatment. Spire Healthcare (LSE:SPI) is one such operator that is enjoying a strong uptick in patient demand.
Revenues rose 8.3% year on year to £1.9bn in 2022 as the number of self-pay patients and individuals using private medical insurance kept rising. This helped it swing from a pre-tax loss of £1.9m the year before to a profit of £3.9m.
The NHS is in dire straits today. The number of people awaiting treatment sits at record highs above 7.2m… and looks set to keep increasing.
BUPA, Aviva and Vitality — three of the UK’s largest private health insurers — added a combined 480,000 new customers in 2022, the Telegraph has reported. I think we could be at the beginning of a sea change in patient behaviour that powers profits at Spire and its peers.
As an investor I’m concerned about how high cost inflation could hit profits at the company. In particular I’m wary of shortages of key nursing and other medical staff which is pushing up wage expenses.
Yet I believe these risks are baked into the FTSE 250 firm’s ultra-low valuation. City brokers think annual earnings will soar 62% this year. This means Spire shares trade on a forward price-to-earnings growth (PEG) ratio of just 0.5 today. Any reading below 1 indicates that a stock is undervalued.
Coca-Cola HBC
Soft drinks bottler Coca-Cola HBC (LSE:CCH) has had a difficult time over the past year. The ongoing war in Ukraine and its subsequently withdrawal from Russia have put a large dent in profits.
But brokers expect the FTSE 100 firm’s earnings to rebound strongly this year. An annual increase of 45% is currently predicted, leaving its shares trading on a forward PEG multiple of 0.3. This makes Coca-Cola HBC a brilliant bargain, in my opinion.
The business — which sells popular including Coca-Cola, Fanta and Sprite — benefits from the same brand power that make the likes of Unilever and Diageo exceptional profits generators. Yet it trades at a much, much, lower valuation to these other fast-moving consumer goods (FMCG) giants.
Even when broader consumer spending declines, products with high customer recognition remain highly popular. The prices of these popular goods can also be hiked without volumes collapsing. This is why revenues at Coca-Cola HBC rose an impressive 22.7% (excluding Russia and Ukraine) in 2022.
Like those other FMCG companies, Coca-Cola HBC also has significant exposure to developing markets. As a long-term investor this has considerable appeal to me. Profits should receive a big boost as population levels and personal wealth in these regions steadily rise.
At current prices I think now could be a good time to add to my existing holdings. And especially as the business also carries a market-beating 4.2% dividend yield today. Like Spire, I plan to hold this particular UK share for the next decade.
