2 bargain investment trusts I'd buy and hold for 25 years
The outlook for the UK economy remains highly uncertain. Brexit is less than 1.5 years away and in the meantime confidence among consumers and businesses is relatively low. This could cause the performance of various sectors to come under pressure. As such, demand for retail space and office space may rise at a slower pace than has previously been anticipated.
Despite this, investing in commercial property through real estate investment trusts (REITs) could be a shrewd move. In the case of these two REITs, their valuations appear to factor in the risks they may face. As such, now could be the perfect time to buy them for the long run.
Improving outlook
Reporting on Tuesday was Shaftesbury(LSE: SHB). The company owns a 14.5 acre property portfolio in London's West End which is among the most highly-valued sections of real estate in the UK. In the past, it has been able to weather economic woes relatively well. And while the UK economy is experiencing some disruption at the moment, the company appears to be performing as expected.
For example, it stated in its full-year results that occupier demand remains healthy, with typical-sized space letting well. The strong performance of the company can further be seen in its 8.8% increase in dividends. Additional growth could be ahead, with earnings growth of 15.7% reflecting the continuing delivery of the company's strategy. And with 46% of completed space among its three larger schemes now let or under offer, it seems to be performing well.
With a price-to-book (P/B) ratio of 1.05, Shaftesbury appears to be relatively cheap at the present time. Certainly, there could some uncertainty ahead in the wider commercial property market. But with a strong asset base and low valuation, the company appears to offer impressive investment prospects.
Low valuation
Also offering an upbeat outlook at the present time is sector peer Land Securities(LSE: LAND). It also has significant exposure to the London commercial property market. However, it combines this with exposure to a range of assets across the UK, including shopping centres and other leisure assets. Therefore, it may offer a degree of diversity at a time when property prices across the UK are moving at different speeds and in some cases in different directions.
With Land Securities trading on a P/B ratio of 0.6, it appears to offer an exceptionally wide margin of safety. This could signify that there is considerable upside potential on offer for the long run. As well as this, it has a dividend yield of 4.4%. That's considerably higher than the rate of inflation and with earnings growth due to be positive in both the current year and next year, the pace of dividend growth could be relatively high.
Although buying shares in relatively unpopular stocks can be challenging in the short run and may lead to paper losses, Land Securities could prove to be a strong investment opportunity for the long run.
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Peter Stephens owns shares in Land Securities. The Motley Fool UK has recommended Land Securities Group. 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.
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