2 growth stocks I’d buy and hold for a lifetime

These two shares could deliver rising valuations in the long run.

| 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.

Gold bullion on a chart

Image source: Getty Images.

Buying shares that are unpopular may not sound like a good idea to many investors. After all, falling share prices can be persistent, since it’s often difficult for a catalyst to be big enough to fundamentally change the direction of a stock price.

However, unloved stocks can offer turnaround potential. They may provide a wide margin of safety which enables an investor to buy low and sell high. With that in mind, here are two stocks that have fallen in the last year but which could prove to be excellent recovery plays.

Improving performance

Reporting full year results on Wednesday was silver and gold miner Hochschild (LSE: HOC). The company’s performance during the year was impressive, with record production helping to drive revenue higher. Sales increased by 5% to $722.6m, with full-year attributable production of 513,598 gold-equivalent ounces exceeding previous guidance.

Costs, though, increased as expected. While in line with guidance, the all-in sustaining cost per silver equivalent ounce was $12.30. This was up from $11.20 in the previous year and meant that earnings per share slipped to $0.08 from $0.09 last year.

Hochschild’s outlook appears to be somewhat uncertain at the present time. It continues to make progress with its strategy and is on track to produce 514,000 attributable gold equivalent ounces in 2018. Its bottom line is due to increase by 36% in the next financial year, which puts it on a price-to-earnings growth (PEG) ratio of just 0.7. However, with investor sentiment towards the silver and gold mining sector being weak, the stock’s price has fallen by 19% in the last year.

This could mean further falls are ahead in the short run. But in the long term, the company appears to be cheap and performing well. As such, it could generate high capital returns.

Total returns

Also disappointing in the last year have been shares in gold and silver miner Fresnillo (LSE: FRES). Its shares are down 11% in that time, with gold price rises being offset by a falling silver price. Still, the company is forecast to post a rise in its earnings of 8% in the current year, followed by growth of 14% next year. This puts it on a PEG ratio of 1.6, which suggests that it offers a wide margin of safety.

Furthermore, the company appears to have significant income potential. It may have a dividend yield of just 1.8% at the present time, but it has scope to rapidly increase shareholder payouts. Dividends are covered 2.2 times by profit and this means that they could increase in line with earnings over the medium term without hurting the financial performance of the business.

Clearly, the outlook for gold and silver prices is uncertain. However, if a bear market does come into being after the recent stock market correction, Fresnillo’s exposure to gold could make it more popular among investors.

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 considered so you should consider taking independent financial advice.

Peter Stephens owns shares in Fresnillo. 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

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

With a spare £500 I’d buy these UK shares

A financial services giant, a FTSE 250 distributor, a FTSE 100 tech stock, and a gold miner are on the…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Should I buy this defensive FTSE 100 stock for growth and returns?

This Fool takes a closer look at a FTSE 100 stock to see if it could boost his holdings via…

Read more »

Young female analyst working at her desk in the office
Investing Articles

I robbed Mr Market of this cheap FTSE stock!

This FTSE 250 stock has crashed by almost 30% in six months. But I recently bought into this battered business…

Read more »

Mature people enjoying time together during road trip
Investing Articles

3 reasons I’m backing NIO shares to soar!

NIO shares have bounced up and down this year. But where will the share price go next? My bet is…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Up 300%, is the Hurricane Energy share price an opportunity too good to miss?

This Fool looks at why the Hurricane Energy share price has soared in the past 12 months. Should he buy…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

The BT share price crashes 20% in a month. Buy now?

The BT share price has crashed by almost a fifth since coming close to £2 on 12 July. After this…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

How I’d invest £1,000 in growth shares today to target £5,000 in a decade

Our writer reckons he could do well by choosing the right growth shares today and holding them in his portfolio…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

How passive income from stocks can speed up early retirement

By investing patiently over the years, buying quality shares has given me enough passive income to retire 10 or even…

Read more »