Thus far, 2020 has been a turbulent year for investors. Back in February, the FTSE 100 index plunged 32% in the wake of the market crash, which was caused by the outbreak of Covid-19. Since then, many global shares have risen sharply, with the S&P 500 reaching a new all-time high despite the current state of the world economy.
What’s more, current market conditions make it a difficult task to identify the best UK shares to buy. So with that in mind, I’ve picked out two FTSE 100 companies that I think make for solid long-term investments.
Going for growth
Firstly, I want to discuss a company that I believe has the potential to grow significantly in the years ahead. Cyber security software firm Avast (LSE: AVST) is one of Europe’s leading providers of Internet security. Around 435 million users avail of the company’s anti-virus software, with this figure likely to increase given the rise of work-from-home trends. Additionally, considering how vital a role technology plays in the world today, the requirement for high-quality Internet security looks set to dominate in the years to come. That’s more positive news for Avast.
Over the last five years, the company’s share price has risen by around 116%. Among other things, this impressive performance has been fueled by the company’s strong earnings growth. Furthermore, I’m confident that the firm can continue to deliver an outstanding performance moving forward. Therefore, I reckon a price-to-earnings ratio of 20 is amply justified.
Dazzling dividend payout
If you’re on the lookout for UK companies boasting a bulky dividend payout, look no further than British American Tobacco (LSE: BATS). The industry giant has a yield of 7.7%, with a price-to-earnings ratio of 8.4. Despite a balance sheet that carries more debt than I’d like to see, British American Tobacco has performed impressively over recent months. In the first half of 2020, underlying revenues rose 1.1%, while operating profits climbed 3.3%.
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Moreover, analysts at the reputable investment bank Morgan Stanley believe that the firm’s ability to grow is underappreciated. They highlight the potential for growth in the user base and the company’s new business model as reasons for this. Of course, investing in BATS shares won’t be for everyone. After all, the company is firmly regarded as a ‘sin stock’.
Ultimately, thanks to the company’s dominant market position and stable cash flows, I reckon the dividend payout is about as safe as they come.
Generating serious wealth from the best UK shares
The great thing about investing is that you don’t need a fully-loaded bank account to reap the fantastic long-term benefits. Investing even small amounts of money in several outstanding UK businesses can lead to a tidy return. Especially given enough time in the market.
With that in mind, I’d continue hoovering up high-quality shares and holding them for the long term. After all, it could turn out to be your path to financial freedom.
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Savvy investors like you won’t want to miss out on this timely opportunity…
Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).
Not only does this company enjoy a dominant market-leading position…
But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!
And here’s the really exciting part…
While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.
That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.
Matthew Dumigan 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.
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