Want to buy strong shares for the long term but not sure where to start? Here are five companies that I think warrant your attention.
On the Beach
Terrorist attacks, an air traffic control strike, a failed military coup and uncertainty over Brexit have all conspired to hammer travel stocks over the last year. Nevertheless, I’m still optimistic as far as On the Beach (LSE: OTB) is concerned. Its online-only business model and dynamic approach mean it can adjust its marketing budget to changes in demand at the drop of a sun hat and far quicker than its bigger rivals.
It has a price-to-earnings growth (PEG) ratio of only 0.43 and anything under one indicates investors are getting growth on the cheap. So I’ve taken recent weakness as an opportunity to grab a slice of the company. Things could/will stay volatile for some time yet, of course, but I suspect our love of sun and sand will persist and On the Beach will prove resilient.
McCarthy and Stone
No prizes for guessing retirement property developer McCarthy and Stone (LSE: MCS) was a victim of the post-referendum fallout. Its share price plunged by a third.
Looming recession or otherwise, I’m still convinced the company is a solid long-term investment. It has a 70% share in a niche market set to grow exponentially thanks to an ageing population. Baby boomers already sitting on sizeable assets and wishing/needing to downsize are unlikely to be put off by Brexit.
The shares currently trade on just over 9 times earnings. The PEG ratio is even lower than that offered by On the Beach at just 0.37.
I’ve been bullish on drinks wholesaler and off-licence retailer Conviviality (LSE: CVR) for a while now and this appears justified. Last week, it released strong final results to the market. Revenue was up 137% to £864.5m with profit before tax soaring 124% to £21.7m. Elsewhere, free cash flow had doubled to £11.4m and debt reduction was “ahead of plan“. Even better, the full year dividend was increased by 14%.
The best part? On a forecast price-to-earnings (P/E) ratio of 10, the shares still look very reasonably-priced.
One for both income and growth investors, Hull-based meat supplier Cranswick (LSE: CWK) has now entered the FTSE 250 thanks to its rock-solid balance sheet, excellent free cash flow and investor-friendly dividend policy. Indeed, with payouts covered almost 2.5 times by earnings, Cranswick offers perhaps more stability than the listed supermarkets it supplies products to. The company shows no signs of resting on its laurels either, given its recent decision to enter the poultry market as well.
A forecast P/E of 20 suggests the shares are expensive but I think this may be a price worth paying.
The Fulham Shore
Small-cap enthusiasts happy to take on a little more risk may wish to consider The Fulham Shore (LSE: FUL), owner of The Real Greek and Franco Manca restaurant chains. Known for its reasonably-priced, brick-oven-baked sourdough pizzas, the latter is becoming so popular that the company is beginning to open up sites outside of London. Like Cranswick, the shares are somewhat pricey (P/E of 22) but profits are predicted to soar over the medium term as a result of this expansion.
If you need further convincing, Fulham Shore’s chairman just happens to be David Page, the man behind Bombay Bicycle Club and Gourmet Burger Kitchen.
The great unknown
The uncertainty surrounding Brexit has unnerved many. It's also created opportunities to grab shares in some excellent, fast-growing companies on the cheap, as highlighted above.
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Paul Summers owns shares in On the Beach, McCarthy and Stone and Convivality. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.