Finding stocks with the potential to be multi-baggers isn't always about chasing the latest trends. What's more important, in my view, is to focus on companies with sustainable advantages and proven ability to generate high returns.
The two companies I'm looking at today have both doubled over the last five years, and have consistently generated value for shareholders for at least 10 years.
Safer than houses
I wouldn't normally consider an estate agency group as a long-term buy-and-hold stock. But I think that "international real estate advisor"Savills (LSE: SVS)is a bit different, thanks to its international reach and its upmarket focus.
Prime real estate has long been one of the top choices for wealthy individuals who want to invest and preserve their cash. Dips in the market may hit profits sometimes, but this sector of the market has always bounced back strongly. I don't expect this to change in my lifetime.
Today's trading statement from Savills suggests that the group is continuing to trade well at home and abroad. The company says it enjoyed a strong finish to 2017 in the UK and in "a number of Asian and European markets". Profits for the full year are now expected to be ahead of expectations.
The share price reaction to this good news has been minimal, perhaps because longstanding chief executive Jeremy Helsby chose today to announce his retirement. I don't think this should be too much of a concern. Mr Helsby will stay until the end of 2018, when he'll be replaced by the firm's UK & Europe CEO, who has already spent 21 years at Savills.
Why I'd buy
The stock has extra appeal to me because its earnings have historically been matched very closely by free cash flow. This funds sustainable dividends and allows the group to maintain a net cash balance.
No new figures were provided this morning, but I'd expect today's upgrade to add at least 5% to consensus forecasts, giving earnings of perhaps 73p per share. That puts the stock on a forecast P/E of 13.3, with a prospective yield of about 3.2%. In my view, Savills remains an attractive long-term buy.
The ultimate defensive stock?
I can't think of many consumer products which are more defensive than soft drinks and Robinsons squash. But sales of these boring products combined with overseas expansion have helped Britvic (LSE: BVIC) to double its profits and its share price since 2012.
The company is currently two years into a three-year programme to restructure its UK manufacturing and warehousing facilities. This should cut costs and allow the firm to make products in "a broader range of pack sizes and configurations", which is expected to provide new selling opportunities.
This investment programme has pushed up net debt from £338m to £592m and sapped the firm's free cash flow. But this situation should start to return to normal next year. I'm prepared to trust that management is continuing to follow the same growth formula that's driven its success over the last decade.
Britvic stock currently trades on a forecast P/E of 15, with a prospective yield of 3.4%. Given the firm's track record of growth, I believe this could be a good entry point for a long-term holding.
Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Britvic. 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.