Are Barclays PLC And National Grid plc The Perfect Stocking Fillers?

With Christmas coming, what better gift is there for a loved one – or yourself – than some bargain shares to tuck away for long term growth?

I admit that not everyone would be excited by a gift from the stock market, but I’d certainly be very happy to receive a few shares of Barclays (LSE: BARC) and National Grid (LSE: NG) stock to tuck away in my SIPP.

Here’s why.

Barclays, better times ahead?

It’s been a long time coming, but 2016 could be the year when Barclays starts to deliver the goods for value investors.

As we approach the end of the year, analysts expect that Barclays’ 2015 earnings per share will rise by 31% to 22.7p, putting the bank’s stock on a forecast P/E of just 9.8. Earnings momentum is expected to continue too. Consensus forecasts suggest a 17% rise in earnings to 27p per share for 2016. That implies a 2016 forecast P/E ratio of just 8.3 at today’s share price.

Barclays’ cheap P/E rating is backed by a dividend yield that is expected to rise from 3.0% for the current year to 3.8% in 2016.

Finally, the shares currently trade at a tasty 23% discount to their tangible net asset value of 289p. To me, this suggests a reasonable margin of safety is in place against the risk of further impairments on bad debts or asset sales.

One final fact that may tempt you to buy Barclays is that the firm’s new chief executive, American Jes Staley, purchased £6.5m of shares in the bank with his own cash shortly before he took up his new position on 1 December.

National Grid, omens are good

Although National Grid’s dividend yield of about 5% is fairly standard for a utility stock, what’s not so usual is the way the firm’s shares have performed since 2009.

Shares in the National Grid, which has operations in the UK and the US, have risen by 66% over the last five years. By contrast, shares in SSE are up by just 28% and Centrica stock is worth 35% less than five years ago.

It’s clear that National Grid has outperformed. Can this continue? The omens are good. The group’s UK business is not exposed to energy prices or grandstanding political pressure in the way that the customer-facing utility businesses such as British Gas are.

The group’s shares offer a 4.8% prospective yield from a dividend payout that the firm expects to increase in line with inflation for the “foreseeable future”.

However, National Grid is also planning to sell its UK gas distribution business, which is valued at £11bn, and return the majority of the proceeds to shareholders. This could deliver an attractive cash bonus for shareholders.

The other benefit of this disposal, according to the firm, is that by removing this slow-growing part of the business, the group’s overall growth rate will increase.

I rate National Grid as a ‘hold forever’ income stock, with the potential for further long term capital gains.

I'm not alone in this view. The Motley Fool's top income experts recently selected National Grid as one of their top 5 Shares To Retire On.

Each of the stocks chosen for this report offers genuine lifetime growth potential, in my view. I own several of them myself.

If you're building a stock portfolio you hope will help fund your retirement, I'd urge you to take a look at this report.

5 Shares To Retire On is completely FREE and carries no obligation.

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Roland Head owns shares of Barclays and SSE. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.