While the old adage ‘sell in May, and just walk away’ may hold some truth in terms of the summer generally being a quiet period for the FTSE 100, there continue to be a number of buying opportunities across the index.
Certainly, in many cases their valuations are less appealing than they were at the start of the year. But with the world economy still making encouraging progress, a number of large-cap stocks could offer strong bottom-line growth potential.
With that in mind, here are two FTSE 100 stocks that could be worth buying and holding for the long term. While not cheap, they could generate continued share price growth after making strong gains in 2019.
InterContinental Hotels Global hotel operator InterContinental Hotels (LSE: IHG) released a first-quarter trading update on Friday, with its net system size increasing by 5.4% during the period. In the quarter, 24,000 rooms were signed, which is its highest number of signings in 12 years. The company’s global revenue per available room (RevPAR) increased by 0.3% compared to strong comparators, while its performance in the US was encouraging. There were also market share gains made in China, which could prove to be a highly lucrative market over the long run.
InterContinental Hotel’s efficiency programme is expected to deliver $125m in annual savings by 2020. It is focused on offering increasingly innovative design, while seeking to provide service enhancements in order to increase its differentiation. This could boost its financial performance over the long run, while helping to justify its price-to-earnings (P/E) ratio of 20. As such, it could offer long-term investment appeal within what may prove to be a fast-growing world economy.
ABF Primark owner ABF (LSE: ABF) has gained 24% since the start of 2019, with the prospects for the business continuing to be upbeat. It may have greater resilience in an uncertain period for consumers in the UK due to its budget focus, which could resonate with shoppers at a time when consumer confidence is at a low ebb.
The non-retail parts of ABF’s business have generally been performing well in recent quarters. Although its sugar division has experienced challenging operating conditions, the exposure it has to a variety of industries means that it could offer greater diversity and lower risk than many of its FTSE 100 peers.
Certainly, ABF’s P/E ratio of 18 is not especially attractive at a time when a number of FTSE 100 stocks still trade on substantially lower valuations. However, given its resilient growth outlook, as well as its range of operations, it could prove to be a business that offers robust growth over a sustained period. As such, now could be the right time to buy it, with it having the potential to become increasingly popular among investors in a wide range of stock market conditions.
Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods (LON:ABF) and InterContinental Hotels Group. 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.
Motley Fool UK 2019