Bitcoin is okay for speculators but for investors who want to make a million or more in their SIPP or ISA, it’s better to choose shares with long-term potential. These are two of my picks.
Strong brands but struggling operations
AG Barr (LSE: BAG) is the maker of Irn-Bru and other soft drinks. Over the last year, the shares have fallen over 30%. Covid-19 hasn’t helped as it has caused uncertainty and hit demand for the company’s products. However the company faces other issues.
One issue that the company has faced is a notice of termination of its sale and distribution contract with Rockstar Inc. AG Barr had held this contract since 2007, so this was a blow. The sugar tax is another issue the company faces.
Beyond these, Covid-19 has had an impact on its markets. It has been faced with the complete closure of the hospitality sector as well as a “material reduction” in the “out of home” consumption of soft drinks. These trends won’t fully revert back to how they were for quite a while, so could remain a drag on the share price and the financial performance for some time.
AG Barr expects revenues for the 26 weeks ended 25 July to be about 8% lower year-on-year, at roughly £113m, mostly driven by an approximate 12% drop in the second quarter.
It’s a tough time for AG Barr. I don’t know if the share price will bounce back any time soon. I think there are positives, though. It’s a family-controlled business, so they have an incentive to think long term. It has strong brands, and when hospitality reopens fully, there could be an immediate boost to earnings.
A crashing share price with more potential than Bitcoin
Shares in the housebuilder Taylor Wimpey (LSE: TW) have fallen about 40% so far this year. Mostly this is down to Covid-19 and related fears over the economy. Even a cut in stamp duty by the Chancellor, along with rumours that Help to Buy may be extended, haven’t done much to help the shares.
The whole sector is struggling, as I’ve pointed out before. Issues such as the upcoming end of the Help to Buy scheme, Brexit, and wider economic fears have all suppressed housebuilders’ share prices. But for all that there are reasons for optimism.
UK house prices bounced back in July. Prices were boosted by pent-up demand after the coronavirus lockdown ended, according to a survey released by Nationwide.
Taylor Wimpey has a strong balance sheet. Even as completions have fallen alongside profits, the company has increased its net cash. This has risen 26.9% to £497.3m. The group also has a growing land bank giving it significant opportunities for further development if the economy picks back up.
It’s a battered share price I’d be very tempted to buy into today for potentially large returns in the future. Far more so than Bitcoin.
Andy Ross owns no share mentioned. The Motley Fool UK has recommended AG Barr. 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.