Over the past two months, many Britons have been shut away at home. As a result we have been increasingly relying on firms that specialise in e-commerce or at least have a strong online presence. And a number of these businesses are members of the FTSE 100 or FTSE 250 indices.
Since late March, to the relief of most investors, many stocks have been inching up, those linked to e-tail among them. Today I’d like to highlight two shares that may help long-term investors reap juicy rewards.
E-commerce needs packaging
Paper and packaging group Mondi (LSE: MNDI) is one of the lesser-known FTSE 100 companies. Yet its shares may be appropriate for the ‘stay-at-home economy’. The market values the business at more than £6.6bn.
The firm has operations across more than 30 countries and multiple industries. It manages forests, produces pulp, paper and plastic films. And it offers industrial and consumer packaging solutions worldwide.
Year-to-date, MNDI shares are down about 23%. Yet that number would tell only half the story. The stock hit 52 week low of 1,156.50p on 19 Mar. It is now around 1,361p. That is a rally of over 17% in less than two months.
I believe this increases has in part been due to the market sentiment that growth in e-commerce, especially during this lockdown period, will likely benefit the business. And many investors probably felt the shares were cheap enough to buy.
The group’s trading update of 9 April highlighted that the order books held up well in Q1, thanks to consumer and e-commerce end-uses across the packaging and engineered materials businesses.
Management has also taken various steps to protect profitability, liquidity and cash flow. It’s delaying non-essential capital expenditure and slowing down some of its major capital projects.
Furthermore the board announced that “it is prudent to no longer propose a final dividend for the year ended 31 December 2019“.
Mondi’s forward P/E of 12.5 and P/S ratio of 1.1 makes me confident enough to buy the dips.
Are Royal Mail shares cheap?
In early January, Royal Mail (LSE: RMG) shares were around 232p. On 16 March, they hit a 52-week low of 118.86p. Now they are hovering around 168p.
Regular Motley Fool readers may remember that shares in the postal delivery service took a beating even before Covid-19 hit our shores, reflecting concerns on a wide range of issues affecting growth and earnings. Indeed, over the past five years, £1,000 invested in RMG stock would have decreased to around £350 today.
The group handles over 50% of all parcel deliveries in the UK. And due to increased e-commerce, more parcels are being sent during the lockdown. Put another way, a large number of investors have likely realised that increased e-commerce should benefit the business of the FTSE 250 member.
Citigroup recently upgraded the shares to ‘buy’ from ‘sell’ with a target price of 210p. And in early May, Czech billionaire Daniel Kretinsky bought more than 5% of the postal service’s shares. His purchase may lead to further business development that may help the Royal Mail share price grow further in the rest of the year and beyond.
If you’re a dividend-seeking investor, however, in late March the board decided not to propose a final dividend for the year. Yet I’d still consider buying the shares for the long run, especially if the price drops below 150p.
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tezcang has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.