2 stocks I'd hold for the next 20 years
For investors seeking strong and sustained earnings growth for many years, it's difficult to look past London's quoted healthcare providers.
Those that specialise in keeping us alive and maintaining our wellbeing are a classic defensive play, with medicines and care demand remaining broadly resilient regardless of broader economic considerations. And thanks to population growth, the revenue opportunities of many of these businesses are improving year after year.
One such stock I'm tipping for greatness in the years ahead is Alliance Pharma(LSE: APH). Unlike most pharmaceutical plays -- like GlaxoSmithKline and AstraZeneca, whose earnings visibility are not as strong thanks to the temperamental nature of drugs R&D -- this business doesn't have to worry about the impact of such setbacks as the drugs it acquires have already passed the often-painful development process.
What's more, the treatment areas that Alliance Pharma concentrates on are relatively niche and with very little competition, provide profits estimates with that little extra visibility.
A long term lovely
Now new investors seeking exceptional earnings growth from the off are likely to be disappointed, with City analysts tipping a 12% fall in 2017.
That said, I would still consider now a terrific time to load up on the AIM-quoted business. Firstly, Alliance Pharma is expected to bounce back straight away from the aforementioned projected rare earnings dip with a 10% advance next year. And right now the medicines mammoth also deals on a pretty undemanding valuation, with the firm rocking a forward P/E ratio of 16.8 times.
This reading is also pretty reasonable when you consider the exceptional earnings possibilities created by Alliance Pharma's commitment to acquisitions. It spent £16m on M&A action in 2017 alone to bolster its global footprint and, thanks to its strong balance sheet, free cash flow jumped to £21.7m last year, from £13m in the prior period. So investors can look forward to further earnings-driving buys in the years ahead.
Applegreen (LSE: APGN) is another stock I'm tipping to thrive as it also splashes the cash to generate electric profits growth.
The AIM-listed stock, a major retailer at petrol stations in the Republic of Ireland, has spent a fortune on expansion in recent times and, as a result, the number of locations it operates from has leapt from 64 in 2009 to 342 just eight years later. And Applegreen's growth strategy is also seeing it spread out onto foreign shores to boost its revenues possibilities still further.
Unlike Alliance Pharma, the Dublin company is not expected to endure any near-term earnings turbulence and it's predicted by City analysts to generate a 5% bottom line improvement in 2018. And growth is expected to accelerate to 2019 next year as its expanded geographic presence delivers the goods.
Right now, Applegreen carries a forward P/E ratio of 23.3 times. This may be high but it should prove no barrier to further share price advances as the company's market value has also swelled by more than a third over the past 12 months alone.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended Alliance Pharma and AstraZeneca. 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.