Investing £5,000 in the stock market may be a drop in the ocean for some, but for others it’s a major sum. Regardless of whether you’re a seasoned investor or a beginner, it can be hard to know where to put your money.
While doubters have cast aside equities as a volatile alternative to traditional saving, stock markets have performed well over many decades and especially in recent years, despite ongoing geopolitical and economic uncertainty.
The FTSE 100 represents some of the most reputable and profitable companies listed in the UK, and I believe GlaxoSmithKline (LSE:GSK) and Ashtead Group (LSE:LON:AHT) are two names within the index that could provide decent returns for your £5k in the future.
Brexit boost Pharmaceuticals giant GlaxoSmithKline would have ‘welcomed’ the entrance of Boris Johnson into 10 Downing Street last week to a certain extent, with defensive industries like pharma tending to perform positively in uncertain times.
The possibility of a no-deal Brexit just got significantly more likely with the arrival of Bo-Jo, and I would wager that defensive sectors are likely to see a bit of a boost in the coming months.
While the GSK share price has performed steadily rather than spectacularly over the last couple of years, the stock is up around 13% year-to-date and I see that trend continuing for the rest of 2019 and beyond.
In its quarterly results report last week, the company lifted its full-year guidance on the back of positive performance in Q2. Sales were higher than expected, and adjusted earnings per share came in at 30.5p, ahead of City analysts’ expected 25.6p.
The share price reacted positively following the results and as GSK reaffirmed its commitment to maintaining its dividend, which on current value provides a yield of 4.8%.
As has been pointed out by Kevin Godbold, both GSK and the wider pharma industry have no shortage of challenges facing them, particularly in relation to patents expiring and therefore the end of exclusivity for many of their products.
However, I still see the long-term prospects as a solid investment buy and unlikely to change any time soon.
Exponential growth My colleague Edward Sheldon recently asked whether Ashtead Group is the FTSE 100’s best kept secret — and I’d say yes, considering it’s still relatively unknown to investors despite a 140% rise in its value in the last five years.
The story of the rental equipment supplier has been one of exponential growth across its key markets of the UK and US as demand for its services has skyrocketed.
That outperformance has spanned varying economic and geopolitical conditions, making it all the more impressive, and with the construction sector building on another period of strength, I expect Ashtead’s star to continue to rise.
With a P/E ratio of just under 13, based on its current price of 2295p, the firm doesn’t appear to be overly expensive either.
Ashtead is expected to raise its dividend again in 2020 to 43p, continuing its trend of increasing returns to shareholders by more than 20% every one of the last five years.
While the yield doesn’t appear to be hugely appetising at 1.5%, its rising share price is. All things considered, Ashtead appears to be in a strong position to continue its growth and I’d certainly add it to my portfolio at this point.
Conor Coyle has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. 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