A FTSE 100 growth stock I’d buy and hold forever

Royston Wild looks at a FTSE 100 (INDEXFTSE: UKX) share in great shape to deliver stonking earnings expansion.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Gold producers like FTSE 100-listed Randgold Resources (LSE: RRS) have been firmly on the defensive since early autumn, their share prices tracking the steady decline in gold values.

The yellow metal has eroded from 2017 peaks of around $1,350 per ounce set in September, prices coming under pressure as tensions between the US and North Korea have receded and expectations of extra monetary policy tightening by the Federal Reserve (and central banks further afield) have grown. Bullion was last dealing at around $1,240.

However, gold demand has not exactly fallen off a cliff as evidenced by latest World Gold Council data. This showed holdings in global gold-backed ETFs rose by 9.1 tonnes in November, taking the total to some 2,357 tonnes.

The continued demand for the safe-haven commodity does not come as a surprise to me given the reserves of political and economic intrigue still spooking markets.

Will President Trump continue to face legislative roadblocks? What will Robert Mueller’s investigation into Russian collusion mean for the future of the Trump administration? How will the White House respond to the next set of provocations from Pyongyang? And, across the Pond, when will the UK government get to grips with the Brexit conundrum?

And any of these issues have the potential to blast bullion values higher in the weeks and months to come.

They say that investors should always make room in their portfolios for gold, or at least exposure to gold-producing companies, as a hedge against so-called ‘doomsday scenarios’ that could batter the rest of their holdings.

In the current environment this sentiment is a wise strategy, in my opinion. And buying into metals mammoth Randgold Resources could prove a very wise move.

With City analysts predicting that gold values will remain strong, and Randgold steadily increasing output across its African mines, earnings at the business are anticipated to shoot 18% higher in 2017 and 24% higher in 2018.

A forward P/E ratio of 28.9 times may look expensive on paper, but I reckon the London company’s robust long-term profits outlook merits such a premium.

In deep water

I am afraid that my positive outlook for gold values does not extend to another go-to commodity in uncertain times — crude oil — given enduring questions over the enduring market imbalance.

Supply disruptions and the recent OPEC agreement to keep the taps turned down has propelled energy values skywards recently and just this week, Brent sprang to two-and-a-half-year highs above $65 per barrel following the closure of the Forties North Sea pipeline.

But with output from US shale producers heading steadily higher, and investment in the oil sector by other major producers like Canada and Brazil also increasing, my long-term view on crude values remains pretty pessimistic.

And as a result I will continue to give oilfield services play John Wood Group (LSE: WG), which reported today, short shrift. It advised on Wednesday that “our core oil & gas market continued to present challenges in 2017” and trading could very well remain tough as  oil producers batten down the hatches in a bid to conserve cash.

City analysts are expecting earnings to fall 8% in 2017 and to recover 9% next year, but I believe the possibility of extended profits declines is extremely high. As a result I for one will be giving Wood Group a wide berth despite its cheap forward P/E multiple of 13.8 times.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

2 recession-resistant UK stocks I’d buy and hold for a decade!

Our writer details two UK stocks she believes could still continue to perform well in a recession and not feel…

Read more »

Back view of blue NIO EP9 electric vehicle
Investing Articles

Down 31% this year! Is now the moment to buy NIO stock?

NIO stock has moved sharply downwards in the past couple of months. Christopher Ruane likes the business potential -- but…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 dividend stocks I reckon could grow payouts for years to come!

This Fool is looking for dividend stocks and explains why these two picks could be primed to grow their payouts…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Should I buy, sell, or hold my Rolls-Royce shares at £3.50?

This Fool considers what he should do with his Rolls-Royce shares following the FTSE 100 company's excellent full-year results last…

Read more »

Couple working from home while daughter watches video on smartphone with headphones on
Investing Articles

With a spare £280, here’s how I’d start buying shares this March

Our writer reflects on what he has learnt on the stock market to explain how he would start buying shares…

Read more »

Businesswoman calculating finances in an office
Investing Articles

Are these expensive FTSE 100 stocks actually brilliant bargains?

Paul Summers takes a closer look at two FTSE 100 stocks that could recover strongly in time, despite already carrying…

Read more »

Investing Articles

What might the recent Aviva share price performance tell me as an investor?

Christopher Ruane looks at how the Aviva share price has performed over the past 12 months and considers whether he…

Read more »

Investing Articles

Down by a quarter, is the BT share price a steal?

The BT share price has more than halved in the past five years. What is holding it down -- and…

Read more »