Member Login
Home » Investing Articles » Have £1,000 to invest? Morrisons is a FTSE 100 share that I’d buy and hold for the next 10 years

Have £1,000 to invest? Morrisons is a FTSE 100 share that I’d buy and hold for the next 10 years

WM Morrison Supermarkets plc (LON: MRW) seems to offer stronger growth potential than the FTSE 100 (INDEXFTSE: UKX).

Posted by
Peter Stephens
Having held various senior management positions in the manufacturing sector, Peter founded his own manufacturing company in 1996. This was subsequently sold in 2007. Meanwhile, his passion for investing (which began during the privatisations of the 1980s) remains strong and he couples this with writing for The Motley Fool as a Contractor. His investment style is value-oriented; focusing on company fundamentals, as well as assessing the strength and presence of a competitive advantage. While above-average growth prospects remain very attractive, a greater focus on dividends has crept in since Peter became a part-time retiree in 2007.
Published
| 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.

The recent performance of Morrisons (LSE: MRW) has been stunning. The company delivered its best quarterly sales performance in a decade in its most recent quarter, with the last couple of years showing a step-change in its growth prospects under its current strategy.

Looking ahead, the company could generate further sales and earnings growth over the long run. This could help it to outperform the FTSE 100, as well as many of its retail sector peers. As such, it could be worth buying alongside another growth share that reported positive results on Friday.

Improving outlook

The company in question is designer, developer and distributor of toys, games and giftware Character Group (LSE: CCT). The company released a trading update which showed that is has delivered a solid performance, and saw a return to growth in the second half of the year. Its UK business has delivered record sales, and this is set to mean that it comfortably meets expectations for the full year.

The company has seen strong demand from customers for its core ranges and new introductions. It is optimistic about its prospects for the autumn/winter trading period, including the key Christmas period.

Character Group is forecast to post a rise in earnings of 19% in the current year. This would be a strong result given the uncertainty which surrounds the UK economy, and especially the outlook for consumer confidence given the risks from Brexit. With the stock having a price-to-earnings growth (PEG) ratio of 0.6, it seems to offer a wide margin of safety. This could lead to high capital growth over the medium term, which may make it a worthwhile purchase at the present time.

Improving business

Morrisons also seems to be successfully navigating what continue to be uncertain prospects for the wider UK retail sector. As mentioned, its sales growth has been strong, and this trend could continue over the next few years. Its investment in the wholesale part of its business could make a significant impact on its overall financial performance. It continues to target £1bn in sales from its wholesale supply division, with it enabling the company to capitalise on the growth potential on offer within the convenience store sector.

Looking ahead, Morrisons is forecast to post a rise in earnings of 9% in each of the next two financial years. Given the challenging trading conditions it is facing, both from weak consumer confidence and strong competition in the supermarket sector, a high-single-digit earnings growth rate suggests that it has a resilient business model versus many of its peers that are struggling to post positive sales growth.

With the business focused on expanding its online presence and reducing debt levels ahead of potential interest rate rises, it seems to be in a strong position to perform well in the long run. As such, it could be a stock that is worth buying today, and holding for the long term.

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.