Buy-and-hold investing remains one of the most effective ways to generate long-term wealth through the stock market. With that in mind, today I’m looking at two FTSE 100 growth stocks that I believe have excellent buy-and-hold potential going into October.
When Warren Buffett hunts for investment opportunities, he often picks out companies that have wide ‘economic moats’ that enable market share to be protected. It’s a smart investment strategy as often, these companies are able to generate consistent profits year after year.
One company within the FTSE 100 that stands out to me as having a wide economic moat is property search website Rightmove (LSE: RMV). In the first half of 2018, its market share of traffic across both desktop and mobile was 74%, with the mobile component even higher. In short, if people are looking to buy or rent a property in the UK, there’s a good chance they’ll use Rightmove.
Its revenues and profits have powered higher in recent years, and while there’s naturally a little uncertainty about the future due to Brexit, recent half-year results looked robust, with revenue rising 10% and underlying basic earnings per share rising 13%. The dividend was also increased 14%, which suggests management is confident in the outlook.
The share price has pulled back by around 10% over the last three months, and as such, I think now could be a good time to take a closer look at the stock. The forward P/E of 26.9 is not a bargain, but I think it’s a fair price to pay for this high-quality growth stock.
St. James’s Place
Another FTSE 100 growth stock that could be worth a look right now is wealth management specialist St. James’s Place (LSE: STJ), which has a network of over 3,800 financial advisers across the UK.
Like Rightmove, STJ is a leader in its field and has a very good reputation within its industry. This is illustrated by its client retention rate, which at 96% for the first half of 2018, was very high. In my view, the company looks very well placed to profit from the increasing demand for highly personalised, trusted financial advice in today’s complex, low-interest-rate financial environment.
Recent half-year results demonstrated that St. James’s Place has significant momentum at present. Gross fund inflows were up 15% to £7.9bn for the period and group funds under management rose 16% to £96.6bn. Impressively, the group also hiked its dividend by a massive 20%, which suggests the outlook is bright.
STJ has received several broker upgrades recently, with Barclays raising its price target to 1,456p and JP Morgan raising its target to 1,329p. That implies upside of 27% and 16% respectively from the current share price. Yet the stock has struggled for upward momentum this year. As such, I think now could be a good time to buy shares in the company. A forward P/E of 20.5 looks reasonable, in my view.
Edward Sheldon owns shares in St. James's Place. The Motley Fool UK has recommended Rightmove. 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.