With the FTSE 100 currently in a shaky position, shares of quality companies may be worth buying for the long haul. This will allow these businesses’ true worth to shine through the current, temporary volatility. Here are two top value stocks investors should consider buying and holding for big gains by 2033.
1. Taylor Wimpey
Currently trading around 7.1 times its earnings, housebuilder Taylor Wimpey (LSE:TW) offers deep value. Concerns over rising mortgage rates have gutted its valuation, but strong demand fundamentals continue to underpin its long-term growth trajectory as housing under-supply persists.
But what else makes Taylor Wimpey an attractive long-term value stock to buy? Well, it focuses on larger, higher-margin houses than some of its peers, and its more affluent customers lend stability amid the current housing market.
Not only that, prudent land banking and cost discipline will continue to boost shareholder returns as well. Plus, its geographic diversity across the UK will also help insulate it against regional housing downturns.
Its unique dividend policy also provides a safety net. Yielding at 7% now, the developer’s guarantee to return at least 7.5% of net asset value to investors every year makes Taylor Wimpey an extremely lucrative value stock, as it can generate passive income for investors while waiting to appreciate in value.
2. easyJet
Moving on to easyJet (LSE:EZJ), the budget airline benefits from a lean, efficient operation, and strong brand awareness. Management has adjusted capacity prudently amid uncertainty, and this is a core feature in its investment case.
Although inflation threatens to eat into discretionary spending, investors should be assured that it’s likely that once inflation and recession fears abate, easyJet can expand utilisation rapidly. Its leading market share on key routes also helps provide competitive strength as the travel industry continues to rebound.
The budget carrier has proven its pricing power and cost efficiencies to return to profitability as well. What’s more, this value stock has fallen off its 2023 highs. And with sustainable air travel growth ahead, easyJet has room to soar again once the economic clouds clear.
Perhaps more importantly, easyJet boasts a pristine balance sheet that’s unrivalled among its peers. Achieving net cash so soon after the pandemic is commendable and shows that the board has been very efficient with its issuance of debt and spending.
The key takeaway
Having said all that, it’s still worth noting that both companies face near-term headwinds like elevated interest rates and costs. But these challenges are also temporary. Considering the good fundamentals these firms possess, quality endures.
Prioritising businesses with solid finances and experienced leaders is the best route to take for those looking to invest in value stocks, and both easyJet and Taylor Wimpey check these boxes. Their low valuations offer margins of safety against short-term risks too, and allow wide room for share price gains.
Some will shun FTSE companies, especially homebuilders now, extrapolating bleak recent trends endlessly into the future. But markets tend to overreact in both directions. This provides opportunities for savvy investors.
Adopting a 2033 horizon should liberate investors to ignore the ephemeral worries of the day. After all, investing often tests patience. But winners require holding through good times and bad. By buying value stocks like these, the future can look prosperous.
The post 2 top value stocks to buy and hold until 2033 appeared first on The Motley Fool UK.
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John Choong has positions in Taylor Wimpey Plc and easyJet Plc. 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.
