Two growth stocks I'd buy and hold for 20 years
Finding companies that are able to offer growth over a sustained period is never easy. Ultimately, fashion and tastes change, which can make even the most innovative of businesses quickly seem outdated.
However, there are some which appear to have significant tailwinds for the long term. Here are two prime examples which could be worth buying and holding for a long period of time.
Future potential
Reporting on Tuesday was sweeteners producer Purecircle(LSE: PURE). The company was able to deliver double-digit growth in the first half of the year, with sales up 13.3%. It experienced upbeat performances in both the US and Europe, with gross profit increasing to $19.7m.
However, gross margin fell by 3.6 percentage points versus the same period of the prior year. This was largely due to negative currency effects, an unfavourable sales mix, and the transition to a more expensive leaf variety that's set to yield higher returns in the future.
Looking ahead, demand for natural sweeteners in the food and beverage market is on the up. Consumers are becoming increasingly health conscious and this means that they may turn to alternative products over the long run. As such, its future appears to be positive.
With Purecircle forecast to grow its bottom line by 49% this year and by a further 69% next year, it appears to offer a strong growth outlook. Since its shares trade on a price-to-earnings growth (PEG) ratio of just 0.8, they appear to offer excellent value for money. As such, now could be the perfect time to buy in for the long run.
Diverse business
Also offering growth potential over the long run is fellow ingredients specialist ABF(LSE: ABF). The company has a solid track record of growth while its range of operations mean it's a relatively well-diversified entity. Certainly, in recent years its retail clothing arm Primark operation has become the main focal point of the business. But with a range of other divisions, it continues to offer relatively stable return potential.
With ABF forecast to grow its bottom line by 10% in the next financial year, the company appears to have a solid growth outlook. Furthermore, with its successful retail division focused on the value segment, alongside growing a US business, it could become increasingly popular if the performance of the UK economy comes under pressure. In fact, in the last financial crisis, Primark won customers from mid-tier operators, and the same could happen in the next few years. Inflation is already relatively high and consumer spending could be squeezed if it remains above wage growth.
As such, ABF could prove to be a strong option for the long run. Its risk/reward ratio seems to be enticing, with a PEG ratio of 1.9 seemingly offering fair value for money given the level at which the wider index trades.
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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended Associated British Foods. 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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