When the markets get too active, people sometimes lose their sense of perspective. On the contrary, I think a stormy stock market makes it even more important for me as an investor to stay calm and reflect. I like the types of stocks that I can buy for the long term, storing them in my portfolio without constantly checking them. Here are two names on my list of UK stocks to buy now for my portfolio that I would be happy to hold for the next 10 years.
Like the planes he powers, aerospace engineer Rolls Royce (LSE:RR) has certainly had its ups and downs over the past two years.
There were a lot of lows. Reduced levels of air travel reduce the need for airlines to maintain their engines. This was a key source of profit for Rolls-Royce. Liquidity concerns led the company to dilute shareholders by issuing new shares. These two risks could reappear in the future.
But there were also ups. Today’s annual results showed a return to both profitability and free cash flow. I see this as a key step in Rolls-Royce’s return to long-term financial health. Any future slowdown in demand could again hurt liquidity. But Rolls-Royce is a well-known supplier in a growing aircraft engine market with very few participants. This should support customer demand and long-term profitability.
A sharp drop in the share price today pushed Rolls-Royce back into penny share territory. Stocks are trading 10% cheaper than a year ago, despite what I think are much brighter prospects. I see them as UK stocks to buy now for my portfolio and hold for the long term.
Related British Foods
Another share for sale is Related British Foods (LSE:ABF), which has seen its share price drop 21% in the past year.
Like Rolls-Royce, the past two years have hurt ABF in more ways than one. Cost inflation in its food business continues to threaten profit margins. The same story is true at her discount clothing retailer Primark.
From a longer-term perspective, however, I see value in the current share price. ABF has as much experience as anyone in dealing with input price inflation, thanks to its decades of experience managing bulk sugar purchases in the commodity market. Its brands such as Pairings and Dorset Cereals should provide him with sources of income for decades to come. These premium brands also give ABF pricing power. This should help offset the impact of inflation on its profit margins over time.
I think the risk of lockdowns hurting Primark’s revenue and profits is now significantly lower than it was just a few months ago. It made me more confident about the prospects of Associated British Foods.
Two cheap UK stocks to buy now
I don’t think Rolls-Royce or Associated British Foods are exciting businesses. In fact, that’s what I like about them. They are big players in well-established markets with continued demand. They each have strong brands that give them competitive advantages.
The drop in their stock price means that both stocks seem to me to have good value. I would happily store them in my wallet for the next decade.
The post 2 cheap UK stocks to buy now – and hold for a decade appeared first on The Motley Fool UK.
Christopher Ruane has no position in any of the stocks mentioned. The Motley Fool UK recommended Associated British Foods. The opinions expressed on the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we give in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of information makes us better investors.
Motley Fool United Kingdom 2022