The Motley Fool

Is Aviva plc A Buy And Forget Share?

Right now I’m analysing some of the most popular companies in the FTSE 100 to establish if they are attractive long-term buy and forget investments.

Today I’m looking at Aviva (LSE: AV) (NYSE: AV.US)

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

What is the sustainable competitive advantage?

The markets for insurance, long-term savings and fund management are highly competitive. Indeed, any company operating within these markets needs a serious competitive advantage to be able to outperform its peers.

Unfortunately, Aviva’s only stand-out advantage is it brand, which has a high level of brand recognition here within the UK.

However, competition within the market for insurance and long-term savings is cut-throat and providers are consistently trying to undercut each other. As a result, Aviva — along with the majority of its peers — lacks any real ability to set prices.

Having said that, Aviva’s larger peer Prudential has put in a strong performance during the past few years as the company’s size and international diversification have allowed it to achieve economies of scale that others cannot. 

In particular, during the past two years, Aviva’s operating profit margin has averaged 1%. However, during the same period, Prudential’s operating profit margin has remained stable at 5%, indicating to me that Prudential could be a better share to buy and forget.

Company’s long-term outlook?

Aviva is currently in the process of a huge reorganisation program, designed to slash costs, improve efficiency and increase shareholder returns.

However, despite these changes I don’t not have much confidence in Aviva’s outlook.

In particular,  the company’s share price has underperformed the FTSE 100 by 57% over the last 10 years as earnings have continually declined and management has missed expectations. Additionally, the company has cut its full-year dividend payout twice during the past five years alone.

Furthermore, Aviva’s net asset value per share has collapsed from a high of 737p back in 2007, to 281p during the first half of this year.

Nonetheless, Aviva could still benefit from ageing populations over the longer term. Although, as I have already mentioned, the market for long-term savings is highly competitive and peers such as Prudential and Hargreaves Lansdown, both of which have better track record than Aviva.

Foolish summary

All in all, it would appear that Aviva’s is struggling to gain traction within a highly competitive market. The company lacks any real competitive advantage and has consistently missed targets for growth and earnings in the past.

So overall, I rate Aviva as a very poor share to buy and forget.

More FTSE opportunities

Although I feel that Aviva is not a buy and forget share, I am more positive on the five FTSE shares highlighted within this exclusive wealth report.

Indeed, all five opportunities offer a mix of robust prospects, illustrious histories and dependable dividends, and have just been declared by the Fool as “5 Shares You Can Retire On“!

Just click here for the report — it’s free.

In the meantime, please stay tuned for my next FTSE 100 verdict

> Rupert does not own any share mentioned in this article.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.