2 Neil Woodford stocks I'd buy and hold forever

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Neil Woodford. Source: Woodford Investment Management Ltd

As one of the very best UK investors of his generation, Neil Woodford is likely to be a good investor to follow in future. While he may not deliver high returns on every one of his holdings, his track record shows that he is likely to perform relatively well over time. With that in mind, here are two of his biggest holdings which appear to be worth buying for the long term.

High growth potential

Neil Woodford is generally bullish about the prospects for the tobacco industry. That's partly why Imperial Brands (LSE: IMB) is one of his top holdings, and he sees the company as having a bright long-term growth outlook. Part of the reason for this is its exposure to e-cigarettes, with its ownership of the blu e-cig brand equating to double-digit sales growth potential for the long run. This could provide the company with relatively strong financial performance, since blu remains one of the major brands of its type in the lucrative US market.

Of course, Imperial Brands' exposure to growth markets across the Middle East and in emerging markets could also positively catalyse its earnings. The company's mature markets, meanwhile, offer a degree of stability which may make its shares more popular if Brexit causes uncertainty among investors. This may be particularly relevant if sterling weakens further and leads to a positive foreign currency translation.

With Imperial Brands trading on a price-to-earnings (P/E) ratio of 14.3, it seems to offer good value for money when its stable growth outlook is factored-in. Alongside this, the company offers a yield of 4.5% from a dividend which is covered 1.6 times by profit. For a tobacco company, this is a relatively high coverage ratio and it means that dividends could be moved much higher in future years.

A recovery play

While Capita(LSE: CPI) has proven to be a rather troublesome stock for Neil Woodford, the company seems to offer significant recovery potential. Certainly, its recent financial performance has been disappointing. A profit warning and rather downbeat outlook mean that its shares have experienced major falls in recent months. However, a new management team and a potentially refreshed strategy which focuses on cost reduction and efficiency could lead to improved performance in the long run.

Furthermore, Capita offers a relatively wide margin of safety at the present time. Its shares trade on a P/E ratio of 10.3 and with earnings growth of 4% expected next year, a higher rating could be on the cards. As well as this, Capita also offers a dividend yield of 5.6%. This puts it among the highest-yielding FTSE 100 shares. Since dividends are covered 1.7 times by profit, further rises in shareholder payouts could be ahead.

Certainly, Capita faces a difficult future. The UK economy may experience some challenges from Brexit and outsourcing is arguably becoming less popular. As such, it may experience some volatility in the short run, but seems to be a worthwhile stock to buy and hold for the long term.

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Peter Stephens owns shares of Capita Group and Imperial Brands. The Motley Fool UK has recommended Imperial Brands. 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.