Here are three quality investments that are worthy of inclusion in any portfolio.
Good shares that you can hold without worrying about the daily ups and downs of the stock market are rare. Here are three that I think are worth putting in an ISA and forgetting about for a few years.
Tesco
Tesco (LSE: TSCO) is a quality growth stock and this week unveiled results for its first quarter. Its overall sales for the thirteen weeks ending 30 May 2009 increased by 12.6%, excluding petrol.
This was driven in particular by its international business where sales increased by 20% at actual exchange rates (11% at constant rates). Sales growth in Asia was 43.8% and in the US sales shot up by 174%.
At the end of February, its operations in Asia and Europe were trading from 1,911 stores, including 608 hypermarkets, with a total of 55m sq ft of selling space. This year, it plans to open 320 new stores with a total of 5.4m sq ft of sales area in these markets and a further 0.6m sq ft is planned to open in the US.
It already operates in China and last year entered the Indian market. In India it is establishing a cash and carry business. In addition, Tesco has signed an exclusive franchise agreement with Trent, the retail arm of the Tata Group.
Trent currently operates four Star Bazaar hypermarkets, with plans to grow to 50 stores over the next five years. It will supply these hypermarkets with products and offer its retail expertise and technical capability to support the development of their business.
For the 53 weeks ending 28 February 2009 turnover was £54.3 billion with profits of £3.0 billion. Trading on a prospective P/E ratio of just 12, I think the shares look good value.
Centrica
For 2008, revenues at British Gas owner Centrica (LSE: CNA) were £21.3 billion, up 31% on 2007's total of £16.2 billion. However, profits were substantially down at £449 million compared with £2.1 billion the previous year.
Centrica also suffered from volatility in energy prices, having to pay over the odds for energy on the wholesale energy markets. Indeed, the fall in reported profits reflects a £1.4 billion charge for revalued energy contracts that are priced above the current wholesale market price.
Centrica's £2.3 billion acquisition of 20% of British Energy from EDF was a good strategic move in my view. It reduces the Group's existing exposure to short-term movements in wholesale energy costs through increased integration.
This deal buys it a piece of the nuclear energy action in the UK. Indeed, Centrica and EDF plan to build four new nuclear plants on existing sites as part of the UK government's plans for the country to get more of its electricity from nuclear generation. Re-launching nuclear power is vital if the UK is to meet its long-term climate change obligations and energy security needs.
At 221p a share Centrica represents a good bet for the future and also provides a decent income, with a prospective yield based on consensus estimates for 2009 of 5.5%.
Amec
Amec (LSE: AMEC) sells consultancy, engineering and project management services. Since changing its focus from the construction sector to the higher-margin oil, nuclear and mining industries it has started to prosper.
Since I recommended the shares on the 13 March at 526p they've risen almost 30%.
Preliminary year-end results out this week showed profits down 42% at £199m compared with £344m in 2007. However, the previous year's figures were boosted by asset sales. Profits before tax, amortisation and exceptional items in the year to 31 December 2008 actually rose to £210.3m from £126.5m a year ago.
Its order book stood at £3.4 billion about a month ago and it also expects further improvement in profit margin this year. It also said it was on track to deliver on its margin target of 8.5% in 2010.
Amec's balance sheet is also strong. Net cash at the end of April 2009 was around £700m. The group's principal UK pension schemes also had an IAS 19 pre-tax surplus of £166m at the end of 2008.
It's been looking at selective acquisitions to improve its competitive position and recently made two small purchases. Expect more to follow.
Analysts' consensus estimate for 2009 pre-tax profits are £235m. So I still think Amec is definitely worth looking at, even after its recent rise.
> Looking for a cheap broker? The Motley Fool Share Dealing service offers trades at just £10 and it's free to open an account.
