Many UK Fools will respond with “investing for the future” when asked what goals they want to achieve from stock-picking. ‘The future’ can mean something different for everyone, of course! For those who plan to pass a portion of their wealth down the family tree, shares with long-term growth potential will be important…
Barclays
What it does: Barclays is a Tier 1 global bank, serving a wide range of client types all around the world.
By Jon Smith. When taking the long-term approach to picking UK stocks, I struggle to find a better candidate right now than Barclays (LSE:BARC). It’s true that the stock has already jumped by 16% over the past year, but I feel it has a long way to go before it starts to become overvalued.
The bank is changing strategy, which was announced back in February. It’s on a multi-year cost saving and efficiency drive. This should leave the firm in a much more profitable position going forward. This ultimately should be reflected in a higher share price with a fairer value. After all, the current price-to-earnings ratio is just 6.61 (below my benchmark of a fair value of 10).
A risk is the potential interest rate cuts, which could put pressure on earnings due to lower net interest income. Yet even with that, I think it’s a stock that’ll do well in decades to come.
Jon Smith owns shares of Barclays.
Halma
What it does: Halma is an industrial conglomerate focused on environmental monitoring, industrial safety, and life sciences businesses.
By Stephen Wright. When it comes to UK stocks, I don’t think many have better long-term growth prospects than Halma (LSE:HLMA). It’s the company I’d buy today to make my future grandchildren rich.
The stock isn’t cheap, with a free cash flow yield of around 4.5%. In a world where returns on cash are about the same, this doesn’t look particularly attractive and the high price tag is a risk.
Over the long term, though, I’m expecting interest rates to fall and Halma’s growth to continue. This typically happens through a combination of acquisitions and operational improvements.
This has proved to be a good strategy for the company. Revenues have increased by over 10% on average over the last decade and earnings per share have grown by around 8%.
If that continues, Halma shares will be worth much more 50 years from now than they are today. And I think there’s a decent chance this happens.
Stephen Wright does not own shares in Halma.
Legal & General
What it does: Legal & General is one of the largest financial services and asset management companies in Europe.
By Charlie Keough. With plans to build long-term wealth for future generations, I think Legal & General (LSE: LGEN) is a smart option. At 247.6p as I write, I think its shares are attractively priced.
The stock has suffered recently. Macroeconomic pressures such as rising interest rates have a detrimental impact on asset valuations.
Nevertheless, I’m bullish on the long-term outlook for the business. With it leading in areas such as lifetime mortgages and inheritance planning, it’s well-positioned to benefit from the UK’s ageing population.
There are currently three million people aged more than 80 in the UK. By 2050, this is predicted to increase to eight million. This should see demand for its services and products steadily rise.
To go with that, its share looks cheap. Today, I can pick them up trading on nine times forward earnings. That’s below the FTSE 100 average. There’s also a whopping 8.2% dividend yield at play.
Charlie Keough owns shares in Legal & General.
Legal & General
What it does: Legal & General is an insurance and financial services company on the FTSE 100
By Alan Oscroft. Since 1988, the Legal & General (LSE: LGEN) share price has multiplied more than seven-fold. It’s been a volatile ride, though, with some big ups and downs.
But to my mind, that makes it an even better long-term buy to stash away for our grandchildren. If we kept on buying regularly, all those dips would have helped boost our total returns.
It’s paid good dividends too, currently on a forecast yield of over 8%. They’ve been erratic. But, again, the long-term cash contribution has been terrific.
Now, Legal & General is in a risky business for sure. It was almost wiped out after the 2008 financial crisis, for example. And that could definitely happen again.
So, a lot of people would buy safe stocks for their grandchildren. But not me.
No, time is the thing that reduces stock market risk above all else. And who has more potential investing time ahead of them than today’s children?
Alan Oscroft has no position in Legal & General.
