If you’re looking for shares to tuck away in your long-term retirement portfolio, a pension specialist might be a good one to consider.
Equiniti Group (LSE: EQN) is actually a lot more than that, as my Foolish colleague Rupert Hargreaves recently explained, and the company has been the subject of merger speculation which adds potential volatility to the share price.
But Wednesday’s news is very much pension-based as the company has just landed “pension administration contracts for the UK Atomic Energy Authority and for the Combined Nuclear Pension Plan.” The deal covers almost everyone working in the UK nuclear industry, reaching around 60,000 current members. I feel that this boosts confidence in Equiniti’s abilities.
A look at the price chart reinforces the erratic nature of Equiniti shares of late. Though they’re up 45% over the past five years to 215p, we’re still seeing significantly lower prices than the peaks of above 300p reached in 2017 and earlier this year.
That’s possibly related to the 1% fall in EPS forecast for the current year, but I see Equiniti as undervalued and the price fall as a buying opportunity. The forward P/E comes in at only around 12.5 for the current year, and predicted 12% earnings growth in 2019 would drop that to 11.
This month’s price weakness suggests the market might be drawing back from the takeover speculation, but I’d never buy a share on such rumours anyway — they often don’t happen, and you can easily lose a chunk of cash.
But in its own right I think Equiniti is a well-priced long-term buy right now, and if there’s a takeover boost, then that could simply be a bonus.
My second pick for today is Target Healthcare (LSE: THRL). You might not be too keen on a real estate investment trust with the jittery sentiment surrounding the property market right now, but Target is in the business of operating specialist, purpose-built UK care homes.
Turning to fellow Fool Rupert again, he has already highlighted the long-term nature of Target’s lease deals, and I think that lends strong support to the reliability of its dividend prospects.
The share price itself has only just about matched the FTSE 100 over the past five years, but dividend yields between 5% and 6% make the overall performance of the stock look impressive to me. There’s a yield of 5.7% indicated for the current year.
A net asset value of 106p at 30 September puts the 112p shares on a slight premium, and that also suggests confidence in the dividend to me.
Investment trusts take on new investment cash through new rights issues, and on Wednesday Target announced a £40m placing at 109p per share.
Chairman Malcolm Naish said the firm has “identified a strong short-term pipeline of assets that meet our strict investment criteria and which are either imminent or in advanced negotiations for acquisition,” additionally pointing out that an enlarged share capital should reduce costs per share.
I like investment trusts as long-term retirement investments anyway, and I see Target as being in a defensive market with demand for its properties likely to rise.
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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK owns shares of Equiniti. 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.