High-quality UK businesses can be identified by several indicators and their stocks tend to have elevated valuations.
Quality is a ‘thing’ in the world of investing. And it’s one of the factors that can drive returns for investors over the long run. Other factors include value, momentum, size and volatility, among others.
Quality plus growth
Quality can work alongside the growth prospects of a business to create long-term gains for shareholders. And it’s perhaps the main ingredient powering super-investor Warren Buffett’s success since he’s been managing capital measured in billions of dollars.
But the often-high price of quality can deter investors from great businesses for long periods. And that can be a good thing because sometimes paying too much for a stock in valuation terms can turn a great business into a poor long-term investment. That’s because over-pricing tends to correct in the end.
So it’s often a good time to become interested in quality stocks when the market becomes pessimistic and starts marking down their valuations. And that’s been happening recently with many of those listed in London.
It’s a good time to dig in with deeper research and consider some of these opportunities for inclusion in a diversified portfolio.
A top biopharmaceutical opportunity
For example, science-led biopharmaceutical company AstraZeneca (LSE: AZN) has dropped by around 14% over the past month. And with the share price near 10,302p, the stock is around 8% lower than it was a year ago.
But the business powers on. And City analysts expect solid advances in earnings and shareholder dividends ahead. However, the valuation is now cheaper than it was recently.
There’s always the risk that the vibrant Research and Development (R&D) pipeline could dry up. But in April, the company said the business started the year well. And there’s been a good flow of positive announcements this year so far.
I’ve wanted AstraZeneca in my long-term portfolio for a long time. And I reckon the stock is worth serious consideration now.
A successful expansion story
However, I’d also consider adding to my holding in global luxury goods manufacturer, retailer and wholesaler Burberry (LSE: BRBY). The company is known for high-end fashion and has been making big strides exporting the idea of ‘Britishness’ abroad, such as in Asia.
With the share price near 2,106p, it’s down by about 20% since April. Although it’s still around 27% higher than a year ago.
Earnings, cash flow and dividends have been growing steadily and there’s no sign of any weakness in the figures.
However, there’s no denying the business is vulnerable to general economic cycles. And it would likely suffer if a downturn gathered strength in the months ahead.
Nevertheless, as recently as May, the directors were upbeat about the outlook. And I think there’s a good chance that recent negative investor sentiment might have driven down the share price unfairly. For me, the weakness signals opportunity.
The post 2 high-scoring UK quality stocks to consider immediately appeared first on The Motley Fool UK.
Don’t miss this top growth pick for the ‘cost of living crisis’
While the media raves about Google and Amazon, this lesser-known stock has quietly grown 880% – with a:
Greater than 20X increase in margins
Nearly 60% compounded revenue growth over 5 years – more than Apple, Amazon and Google!
A 3,000% earnings explosion
Of course, past performance is no guarantee of future results. However, we think it’s stronger now than ever before. Amazingly, you may never have heard of this company.
Yet there’s a 1-in-3 chance you’ve used one of its 250 brands. Many are household names with millions of monthly website visitors, and that often help consumers compare items, shop around and save.
Now, as the ‘cost of living crisis’ bites, we believe its influence could soar. And that might bring imminent new gains to investors who’re in position today. So please, don’t leave without your FREE report, ‘One Top Growth Stock from The Motley Fool’.
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More reading
Cancer pipeline to power future gains for AstraZeneca shares?
The largest FTSE 100 stock just fell 8%! Should investors buy?
Will rumours of a separate listing damage AstraZeneca’s share price?
Here’s what I’d have now by investing £1,000 in AstraZeneca shares 5 years ago
Kevin Godbold has positions in Burberry Group Plc. The Motley Fool UK has recommended Burberry Group Plc. 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.
High-quality UK businesses can be identified by several indicators and their stocks tend to have elevated valuations.
Quality is a ‘thing’ in the world of investing. And it’s one of the factors that can drive returns for investors over the long run. Other factors include value, momentum, size and volatility, among others.
Quality plus growth
Quality can work alongside the growth prospects of a business to create long-term gains for shareholders. And it’s perhaps the main ingredient powering super-investor Warren Buffett’s success since he’s been managing capital measured in billions of dollars.
But the often-high price of quality can deter investors from great businesses for long periods. And that can be a good thing because sometimes paying too much for a stock in valuation terms can turn a great business into a poor long-term investment. That’s because over-pricing tends to correct in the end.
So it’s often a good time to become interested in quality stocks when the market becomes pessimistic and starts marking down their valuations. And that’s been happening recently with many of those listed in London.
It’s a good time to dig in with deeper research and consider some of these opportunities for inclusion in a diversified portfolio.
A top biopharmaceutical opportunity
For example, science-led biopharmaceutical company AstraZeneca (LSE: AZN) has dropped by around 14% over the past month. And with the share price near 10,302p, the stock is around 8% lower than it was a year ago.
But the business powers on. And City analysts expect solid advances in earnings and shareholder dividends ahead. However, the valuation is now cheaper than it was recently.
There’s always the risk that the vibrant Research and Development (R&D) pipeline could dry up. But in April, the company said the business started the year well. And there’s been a good flow of positive announcements this year so far.
I’ve wanted AstraZeneca in my long-term portfolio for a long time. And I reckon the stock is worth serious consideration now.
A successful expansion story
However, I’d also consider adding to my holding in global luxury goods manufacturer, retailer and wholesaler Burberry (LSE: BRBY). The company is known for high-end fashion and has been making big strides exporting the idea of ‘Britishness’ abroad, such as in Asia.
With the share price near 2,106p, it’s down by about 20% since April. Although it’s still around 27% higher than a year ago.
Earnings, cash flow and dividends have been growing steadily and there’s no sign of any weakness in the figures.
However, there’s no denying the business is vulnerable to general economic cycles. And it would likely suffer if a downturn gathered strength in the months ahead.
Nevertheless, as recently as May, the directors were upbeat about the outlook. And I think there’s a good chance that recent negative investor sentiment might have driven down the share price unfairly. For me, the weakness signals opportunity.
The post 2 high-scoring UK quality stocks to consider immediately appeared first on The Motley Fool UK.
Don’t miss this top growth pick for the ‘cost of living crisis’
While the media raves about Google and Amazon, this lesser-known stock has quietly grown 880% – with a:
Greater than 20X increase in margins
Nearly 60% compounded revenue growth over 5 years – more than Apple, Amazon and Google!
A 3,000% earnings explosion
Of course, past performance is no guarantee of future results. However, we think it’s stronger now than ever before. Amazingly, you may never have heard of this company.
Yet there’s a 1-in-3 chance you’ve used one of its 250 brands. Many are household names with millions of monthly website visitors, and that often help consumers compare items, shop around and save.
Now, as the ‘cost of living crisis’ bites, we believe its influence could soar. And that might bring imminent new gains to investors who’re in position today. So please, don’t leave without your FREE report, ‘One Top Growth Stock from The Motley Fool’.
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setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
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})()
More reading
Cancer pipeline to power future gains for AstraZeneca shares?
The largest FTSE 100 stock just fell 8%! Should investors buy?
Will rumours of a separate listing damage AstraZeneca’s share price?
Here’s what I’d have now by investing £1,000 in AstraZeneca shares 5 years ago
Kevin Godbold has positions in Burberry Group Plc. The Motley Fool UK has recommended Burberry Group Plc. 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.
