When markets get too active, people sometimes lose their sense of perspective. If anything, I think that a stormy stock market makes it even more important for me as an investor to stay calm and think. I like the sorts of shares that I can buy for the long term, tucking them away in my portfolio without constantly checking on them. Here are two names on my list of UK shares to buy now for my portfolio I would be happy to hold for the coming 10 years.
Rolls-Royce
Like the planes it powers, aerospace engineer Rolls-Royce (LSE: RR) has certainly had its ups and downs over the past couple of years.
There have been lots of downs. Reduced levels of air travel cut the need for airlines to service their engines. That ate into a key source of profit for Rolls-Royce. Liquidity concerns led the company to dilute shareholders by issuing new shares. Both of those are risks that could come back in future.
But there have been highs too. Today’s annual results revealed a return to both profitability and free cash flow. I see that as a key step on Rolls-Royce’s return to long-term financial health. Any future downturn in demand could hurt liquidity again. But Rolls-Royce is a well-regarded supplier in a market for aircraft engines that is set to grow – and has very few participants. That should support long-term customer demand and profitability.
A sizeable share price fall today has pushed Rolls-Royce back into penny share territory. The shares trade for 10% cheaper than a year ago, despite what I think are much brighter prospects. I see them as UK shares to buy now for my portfolio and hold for the long term.
Associated British Foods
Another share on sale is Associated British Foods (LSE: ABF), which has seen its share price plummet 21% over the past year.
Like Rolls-Royce, the past couple of years have hurt ABF in more ways than one. Cost inflation in its food business continues to threaten profit margins. The same story is true at its discount clothes retailer Primark.
With a longer-term perspective, though, I see value at the current share price. ABF has as much experience of dealing with input price inflation as anyone, thanks to its decades of experience dealing with bulk sugar purchases in the commodities market. Its brands such as Twinings and Dorset Cereals should give it revenue streams for decades to come. Such premium brands also give ABF pricing power. That should help it to offset the impact of inflation on its profit margins, over time.
I think the risk of lockdowns hurting revenues and profits at Primark is now markedly lower than even just a couple of months ago. That has made me more confident on the outlook for Associated British Foods.
Two cheap UK shares to buy now
I do not think Rolls-Royce or Associated British Foods are exciting companies. In fact, that is what I like about them. They are big players in well-established markets with ongoing demand. They each have strong brands that give them competitive advantages.
Their share price falls mean that both shares look like good value to me. I would be happy to tuck them away in my portfolio for the coming decade.
Should you invest £1,000 in Rolls-Royce right now?
Before you consider Rolls-Royce, you’ll want to hear this.
Motley Fool UK’s Director of Investing Mark Rogers has just revealed what he believes could be the 6 best shares for investors to buy right now… and Rolls-Royce wasn’t one of them.
The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 shares that are currently better buys.
Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. 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.
